Question

    JP Morgan has decided to include government papers

    issued by the Reserve Bank of India (RBI) under the fully accessible route in its widely tracked emerging market government bond index.With respect to the given information,which of the following statements is/are correct? I. India will be included in the GBI-EM Global index suite and all relevant derivative benchmarks (including custom indices), starting July 28, 2024. II.The inclusion will be phased over 10 months, with 1 percent weighting included in each month, till March 31, 2025. III.At the start of the inclusion on June 28, 2024, only Fully Accessible Route (FAR)-designated bonds with a maturity date after December 31, 2026, will be assessed for eligibility.
    A Only I Correct Answer Incorrect Answer
    B Only II Correct Answer Incorrect Answer
    C Only I & III Correct Answer Incorrect Answer
    D Only II & III Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

      JP Morgan has decided to include government papers issued by the Reserve Bank of India (RBI) under the fully accessible route in its widely tracked emerging market government bond index (GBI-EM).     India will be included in the GBI-EM Global index suite and all relevant derivative benchmarks (including custom indices), starting June 28, 2024. The inclusion will be phased over 10 months, with 1 per cent weighting included in each month, till March 31, 2025. Indian bonds, like the Chinese, will have 10 per cent weighting. According to the index inclusion criteria, eligible securities are required to have a notional outstanding of above $1 billion and at least 2.5 years’ remaining maturity.  At the start of the inclusion on June 28, 2024, only Fully Accessible Route (FAR)-designated bonds with a maturity date after December 31, 2026, will be assessed for eligibility. Any new index-eligible FAR-designated bonds issued during the phase-in period will also be included.   The Reserve Bank of India introduced the FAR in March 2020, allowing FPIs to invest in bonds without restriction. At present, 23 FAR bonds with a combined value of $330 billion are eligible for inclusion in the index.

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