JPMorgan Chase & Co. will enhance its monitoring of liquidity for long-term Indian debt included in its emerging market bond index following recent restrictions imposed by Indian authorities. The new measures exclude future issuances of such bonds from eligibility, prompting the bank to reassess their inclusion in the index if secondary market activity diminishes or client complaints arise.
Sources familiar with the bank’s internal discussions, who requested anonymity due to the sensitivity of the matter, indicated that JPMorgan will pay particular attention to bonds with maturities of 14 and 30 years. These steps reflect JPMorgan’s cautious stance after India surprised investors by restricting sales of new securities with these maturities, just a month after India’s debt was added to JPMorgan’s flagship index. This action suggests government concerns over the volume of foreign inflows into the Indian debt market.
JPMorgan has refrained from commenting on India’s new restrictions on foreign investment in recently issued debt. A spokesperson for the bank did not provide additional insights when approached by Bloomberg News regarding the scrutiny of liquidity for specific bonds.
India’s inclusion in the index marked a major advancement for its financial market, expected to draw significant investment. This inclusion followed JPMorgan’s removal of Russian bonds from its indexes in response to the invasion of Ukraine. Despite initial resistance from New Delhi over tax changes that could have eased debt trading on platforms like Euroclear, JPMorgan confirmed India’s accession last September.
The enhanced liquidity monitoring for Indian bonds is consistent with JPMorgan’s practices for other Asian markets, including Thailand, the Philippines, and Malaysia. Notably, the Philippines was removed from the index due to liquidity concerns.
Bloomberg Index Services Ltd. will also add certain Indian bonds to its emerging market local currency index starting next year. Bloomberg LP, the parent company of Bloomberg Index Services Ltd., oversees indexes that compete with those of other providers.
