Bonds settle lower after initial euphoria on JPMorgan's index inclusion

The government bonds gave up gains after the initial euphoria of JPMorgan’s inclusion of Indian bonds in its global index. Dealers said the market had already priced in the event, and there are concerns that the actual flow will start in June, which further dampened the excitement of the market participants.

The yield on the benchmark 10-year bond settled at 7.19 per cent, against 7.16 per cent on Thursday. The yield touched the day’s low of 7.09 per cent before the traders started selling bonds at a profit.

“The traders went overboard in the morning, they were expecting some participation from the banks but we have remained on the sidelines,” a dealer at a state-owned bank said. “There were some expectations in the market that the inflows will start after 2-3 months of inclusion, but it will start only in June 2024,” he added.

Market participants expect that more indices might include India after the J P Morgan’s decision.

“We heard that Russell has been keeping an eye on the Indian bonds since last month,” a dealer at a state-owned bank said. “Bloomberg and Barclays might meet in the first week of October to discuss. But, the weightage is significant in the J P Morgan Index, so most of the inflow will come from there,” he added.

India will join the index with 1 per cent in June 2024. The weight will increase by 1 per cent each month until 10 per cent in April 2025. India will be the second biggest emerging market country in the index, after China.