Rupee, bond prices opens higher after JP Morgan's inclusion of Indian bonds

JPMorgan Chase & Co. will add Indian government bonds to its benchmark emerging-market index (GBI-EM) starting June 28, 2024

Indian rupee and 10-year bond prices jumped on September 22 after JPMorgan Chase & Co. announced its decision to include Indian government bonds in its benchmark emerging-market index.

At 9.10am, the home currency was trading at 82.87 a dollar, up 0.26 percent from its previous close of 83.09. The domestic currency opened at 82.83.

"This positive momentum is anticipated to carry over to the onshore market, with a potential to move towards 82.50 in the next few sessions once 82.80 levels are taken out. The upside is likely to remain capped between the 83.25-83.30 zone amid strong RBI intervention," CR Forex said in its latest note.

The 10-year bond yield fell for 6 basis points to hit a two-month low of 7.101 percent from its previous close of 7.163 percent. Bond yield and prices move in opposite directions.

JPMorgan Chase & Co. will add Indian government bonds to its benchmark emerging-market index (GBI-EM) starting June 28, 2024. This move carries substantial implications for India's debt market and global investors, with India's weight in the index limited to a maximum of 10% and eligible Government bonds valued at $330 billion, analysts said. HSBC estimates potential flows of up to $30 billion.

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"India’s inclusion in the bond index is a step in the right direction. With the exclusion of Russia and troubles in China, the options for global debt investors have narrowed down. Hopefully, rating agencies will respect investors' viewpoint and give up on their moody and poor standards. This inclusion will deepen the bond market in India", said Nilesh Shah, Managing Director, Kotak Mahindra AMC.

Also Read | JPMorgan's inclusion of Indian bonds to benefit all asset classes, says Ritesh Jain

Meanwhile, global stocks and bonds faced downward pressure as investors prepared for the possibility of prolonged higher US interest rates. They also watched for potential shifts in the Bank of Japan's ultra-easy monetary policy amid persistent above-target inflation, speculating on Governor Kazuo Ueda's comments regarding future rate hikes and the yen's impact on prices.

Crude oil prices initially dropped in response to the U.S. Fed's hawkish statement, but they found support at lower levels when Russia imposed a temporary export ban on distillate and diesel fuels to stabilize its domestic fuel market.

Asian currencies were trading higher. South Korean won rose 0.3 percent, China Offshore spot gained 0.2 percent, Malaysian ringgit advanced 0.11 percent, Hong Kong dollar, Philippines Peso, Singapore dollar were up 0.04 percent each. Among losers, Japanese yen fell 0.34 percent while Thai Baht declined 0.16 percent.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 105.48, up 0.12 percent from its previous close of 105.36.

(with Bloomberg inputs)