FTSE Russell and SBI launch Indian government bond index series

Sep 25th, 2017 | By | Category: Fixed Income

FTSE Russell and the State Bank of India (SBI) have teamed up to launch the FTSE SBI Bond Index Series. The market-capitalisation weighted, total-return indices measure the performance of fixed income bonds issued in India in Indian rupees (INR) by the Indian government.

FTSE Russell and State Bank of India launch Indian bond index series

The index family consists of one headline index plus seven sub-indices split into different maturity bands.

The headline index covers the entire local government yield curve (greater than or equal to one-year maturity) and is complemented by a series of maturity sub-indexes.

To be considered for inclusion, securities must have a minimum outstanding size of INR 50 billion.

The indices are rebalanced monthly.

Waqas Samad, CEO of fixed income and multi asset, FTSE Russell, commented: “FTSE Russell has a strong track record of forging partnerships to create fixed income solutions for fast-growing domestic markets. India has a significant domestic bond market that continues to see strong demand from foreign investors.

“This partnership with SBI, a leading Indian bank, enables us to be at the forefront of fixed income index innovations in India and we look forward to further developing index products that can create greater awareness and foster liquidity across the India domestic fixed income spectrum.”

The headline FTSE SBI Indian Government Bond Index has returned 8.8% in the 12 months to 31 August. It has a modified duration of 6.6 and the yield is currently 7.0%. The index has 74 constituents.

The index series is the first of many planned launches in the Indian local fixed income market, in partnership with the State Bank of India.

Arundhati Bhattacharya, chairman of State Bank of India, said: “State Bank of India, India’s largest Commercial Bank, has been at the forefront of development of financial markets in India. We have teamed up with FTSE Russell to launch the FTSE SBI Bond Index Series.

“This index will act as a key benchmark for Indian debt for foreign investors looking to invest in the Indian debt market and will significantly contribute to the development and broadening of the Indian Bond Market.”

In terms of ETFs, there are currently very few products providing dedicated exposure to Indian securities. In Europe, there is only one that provides access to Indian bonds, namely the LAM Sun Global ZyFin India Sovereign Enterprise Bond UCITS ETF, which debuted on the London Stock Exchange in November 2015. Unfortunately, this ETF has thus far failed to gather any notable assets.

The partnership between FTSE Russell and SBI, two respected names, may be the spark that’s needed to stimulate new interest in ETF product development opportunities.

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