Bloomberg Index Services has decided to postpone the inclusion of Indian government bonds in its flagship Global Aggregate Index. The announcement came on Tuesday, catching many market participants by surprise.
Market Reaction and Yield Movement
India's bond market reacted immediately to the news. The 10-year benchmark bond yield jumped by 6 basis points, reaching 6.64%. Most investors had expected Bloomberg to announce the inclusion this week, making the deferral particularly disappointing.
Vivek Rajpal, Asia macro strategist at investment advisory firm JB Drax Honore, commented on the development. "The supply-demand imbalance is already large for Indian bonds," he said. "The market had probably assumed that index inclusion would help address that issue. This deferral is not an encouraging development from that perspective."
Reasons Behind the Deferral
Bloomberg Index Services explained its decision in a detailed note. The service provider acknowledged broad support for India's long-term bond market trajectory. Respondents generally favored eventual inclusion in global investment grade benchmarks.
However, several important considerations emerged during the evaluation process. Multiple respondents highlighted operational and market-infrastructure issues that require further examination. These concerns need proper assessment before India can join a flagship global investment grade index.
Bloomberg has committed to providing another update in mid-2026. This gives Indian authorities time to address the identified concerns.
Context of Previous Inclusions
This decision comes at an interesting time for Indian bonds. They have been gradually entering major emerging-market benchmarks over recent years. The journey began with inclusion in the JPMorgan Emerging Market Local Currency Index in June 2024.
Bloomberg itself added Indian bonds to its Emerging Market Local Currency Bond Index in January 2025. FTSE Russell followed suit, including them in its Emerging Market Index in September 2025.
Implications for the Indian Bond Market
The deferral carries significant implications for India's debt market. Rajpal noted that near-term yield premiums will likely persist. Bonds may become more reliant on the Reserve Bank of India's open market operations for support.
This development occurs during a period of substantial government borrowing. Indian states and the central government plan to borrow a combined 8 trillion rupees ($88.65 billion) through debt markets in the January-March quarter. This represents a record borrowing amount for this period.
The market now faces the challenge of absorbing this supply without the expected boost from global index inclusion. Investors will watch closely how authorities address the operational concerns highlighted by Bloomberg's respondents.
