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Changes for Bond Market Investors

INDIA
  • A decade after India first entered into discussions with JPMorgan about inclusion in the widely followed EMBI benchmark, mixed signals are now coming out of India.
  • Following June’s inclusion, India represents one of the largest weightings in the index
  • Discussions on entry were long and enduring given the index provider’s concerns about access for foreign investors
  • From June 28, 2024 India was admitted to the EMBI at a time when China’s economy is slowing dramatically and the potential for protectionism on the rise
  • The inclusion could represent as much as a USD40bn windfall in liquidity given the funds that are benchmarked against this index
  • Yet in less than a month since inclusion, the nation’s Central Bank issued a statement on July 29 that Foreign Investors will no longer be freely able to buy recently issued Indian government bonds with 14 and 30 year tenors.
  • This had not been flagged prior and when considered with the recent tax changes for investors do not hold their investments for more than 12 months, creates an element of uncertainty for foreign investors in India
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