JPMorgan Chase & Co stated that it will remove Russian debt from bond indices. The report to exclude the country from the global financial system comes after Russia invaded Ukraine.
The bank will draw Russian sovereign and corporate bonds from all of its fixed-income indices effective from March 31. Similar announcements from index providers including MSCI, S&P Dow Jones Indices and FTSE Russell came a few days earlier.
The imposition of sanctions on Russia has rendered its debt illiquid and virtually uninvestable and has pushed many of its bonds towards default. Russia and Belarus debt will also be excluded from its emerging market indices which follows environmental, social and governance (ESG) criteria.
However, the decision will exclude Russian bonds from JPMorgan’s “hard currency” corporate and sovereign indices and also its index for debt in emerging market currencies. The investors are highly interested in JPMorgan’s emerging markets indices in the fixed-income asset class and are seen as an industry benchmark.
Pramol Dhawan, the chief of emerging market portfolio management at Pimco, said that he had anticipated Russia to be eliminated as it “doesn’t meet the traceability or liquidity standards that the index has.”
Russia composes 0.83 per cent of the JPMorgan Emerging Markets Bond Index, which is asserted as about $415bn in assets. The elimination itself is uncertain to have a consequence on the value of the index. PricingDirect, a service that rates JPMorgan’s indices, has been continuously reducing the value of Russia’s bonds.
Russia is doubtful to be able to rejoin these records in the near future, even in the circumstance of a ceasefire and disposal of sanctions, the people familiar with the process told. When the US government spotted sanctions on Venezuela, JPMorgan in 2019 cut the country’s weight in the indices to zero, but unlike Russia, did not completely eliminate it.