Bloomberg has once again deferred the inclusion of Indian government bonds in its Global Aggregate Index, citing the need for further evaluation of operational and market infrastructure components.

The latest delay comes as Bloomberg called for additional assessment before proceeding with the inclusion, according to people familiar with the matter. The decision deals a setback to investors who had been anticipating increased foreign capital inflows into India's debt market following index inclusion. India's government bond market is one of the largest among emerging-market economies, making its participation in global benchmarks a significant milestone for international fixed-income portfolios.

The deferral could trigger an immediate rise in sovereign bond yields, bond dealers said, as market participants adjust their expectations for the timing of passive fund flows.

On Friday, yields on the 10-year benchmark government bond closed at 6.83%, up two basis points from the previous close. Bond dealers expect yields to trade around 6.90% on Monday following the news.

Despite this delay, Indian bonds remain part of several other emerging market debt indexes, ensuring continued participation from a segment of global investors.

Bloomberg's Global Aggregate Index is one of the most widely tracked fixed-income benchmarks in the world, and inclusion typically generates significant passive inflows from index-tracking funds as portfolio managers adjust their holdings to match the benchmark's composition.

India's efforts to gain entry into major global bond indices have been closely watched by market participants. To facilitate index inclusion, India introduced the Fully Accessible Route (FAR) in 2020, allowing non-resident investors to trade in specified government securities without restrictions. JPMorgan Chase announced in 2023 that it would include Indian government bonds in its Government Bond Index-Emerging Markets (GBI-EM) starting in June 2024, a move that was expected to bring billions of dollars in inflows. Bloomberg's index, along with those compiled by FTSE Russell, represents another avenue through which India seeks to deepen foreign participation in its domestic debt market.

Source: Economic Times Markets