JPMorgan to closely monitor Indian bond liquidity after investor curbs

By Ronojoy Mazumdar

JPMorgan Chase & Co. will more closely monitor liquidity in longer tenor Indian debt that is part of its emerging market bond index, after moves by authorities to remove eligibility from future issuances of the bonds.
 

A lack of secondary market quotes or complaints from clients would prompt the the Wall Street bank to reassess whether the notes should continue to be included in the index, according to a person familiar the institution’s thinking, who asked not to be named because they weren’t authorised to speak publicly on the matter. The index-provider will also keep close tabs on notes with a maturity at issue of 14 years and 30 years, the person also said.

The South Asian nation surprised investors by imposing restrictions on sales of new securities with those tenors this week, just a month after it was included in JPMorgan’s flagship gauge. The move suggested officials were uneasy about the amount of inflows landing in the government debt market. 

The US lender so far has declined to comment on India’s decision to restrict foreign investment in some newly issued debt. When contacted by Bloomberg News about whether liquidity in certain bonds was now being scrutinised more closely, a spokesperson for JPMorgan declined to comment. 

India’s accession to the index is a significant milestone for its financial market and is projected to attract billions in investment. Having removed Russian bonds from its widely-tracked indexes following the invasion of Ukraine, JPMorgan announced India’s inclusion last September even though New Delhi balked at tax changes that would have facilitated the trading of the debt on platforms such as Euroclear.

The liquidity checks for India aren’t exceptional. JPMorgan has taken similar steps in the case of other Asian markets, including Thailand, the Philippines and Malaysia, the person said. The Philippines was removed from the index due to declining liquidity, the person said.

The lender also declined to comment when asked about the steps taken with respect to other countries. 

Bloomberg Index Services Ltd. will also include some Indian bonds in its emerging market local currency index starting next year. Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which administers indexes that compete with those from other service providers.