JPMorgan to launch long-awaited 'frontier' local currency debt index

Analysts estimate that tradeable local-currency emerging market debt has trebled over the last decade to around **$1 trillion**. The new **GBI-EM Edge** will track almost **$330 billion** of that total. Its nominal yield of almost **10.4%** is roughly **440 basis points** more than the mainstream EM local currency index. Back-testing also shows its returns would have been **1.2 percentage points** higher on an annualised basis over the last nine years. Some investors had feared the **$250 million** minimum requirement would have seen the likes of Zambia excluded from the index, but the country's efforts to increase the size of its bonds in recent months means it has made the cut. "Many of these markets look a lot like the core emerging markets did in the early 2000s," JPMorgan said in its note detailing the index. "High nominal carry, improving market plumbing, and periodic bouts of volatility." JPMorgan is set to launch its long-awaited **"frontier" market local-currency government bond index** by the end of September, giving investors a new benchmark for nearly **$330 billion** of debt across some of the world's fastest-growing economies. Coming almost 20 years after its hard-currency NEXGEM frontier index, the Wall Street bank's new **GBI-EM Edge** benchmark will cover bonds from **26 countries**, a JPMorgan note to investors seen by Reuters showed. Those set to have the biggest weightings include **Egypt, Vietnam, Morocco, Kazakhstan, Bangladesh, Pakistan, Nigeria and Sri Lanka**, many of which have enjoyed strong market rallies in recent years after crises. The new index will only include bonds of **$250 million equivalent or above**. They must also have at least **2.5 years** left to maturity, while the maximum weighting that any country can have in the index is capped at **8%**. African countries will account for almost **45%** of the index, while **"Frontier Asia"**, mainly Vietnam, Kazakhstan, Pakistan and Bangladesh, all of which will carry the maximum 8% weightings, will make up nearly a third. Thomas Christiansen, head of EM fixed income at fund manager UBP in London, said the index's launch reflected the growth in frontier market investing. > "I don't think this index would have been possible 10 years ago," Christiansen said. "People are waking up to the fact that these markets are really interesting and help diversify portfolios." Bond indexes can impact the fortunes of developing economies as international investors often gravitate towards the bonds included in them. FTSE Russell has had an equivalent index since 2021. JPMorgan indexes, however, are more prominent among emerging market money managers, who also use them to measure their own performance.

JPMorgan to launch long-awaited 'frontier' local currency debt index

Frontier debt market growth and yield profile

JPMorgan set to launch frontier local-currency index

Index rules, regional weightings and investor interest

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