FTSE Russell to include China sovereign bond in FTSE World Government Bond Index

 

FTSE Russell said it could include China's government bonds in the FTSE world government bond index. This will lead to hundreds of billions of dollars of foreign investment in China's financial market. The 10-year government bond yield of China is currently 240 basis points higher than the US bond. Goldman Sachs said it could invest $ 140 billion in China's debt market. Peoples Bank of China deputy governor Pan Gongsheng said that international investment in the Chinese market has grown by more than 40% in the last three years. Currently, foreign investors have Chinese bonds worth $ 410 billion (2.8 trillion yuan). This is less than 3 per cent of China's bond market.

 

If approved, the process of including a Chinese bond in the FTSE world government bond index could begin in October next year. FTSE Russell is a subsidiary of the London Stock Exchange. It refused to include the Chinese bond in the FTSE world government bond index last year for various reasons such as liquidity and transaction settlement. He said that China has resolved their issues. FTSE Russell said it would state in March on which date the Chinese bond would be included in the index.

 

Jason Pang of JP Morgan Asset Management said that in the last 20 years, the Chinese bond market has grown by more than 60 times to about $ 1.4 trillion. China is the second-largest bond market in the world bond market. This will be China's third entry into the major global bond index. Earlier, Chinese sovereign bonds have received entry into the Bloomberg Barclays Global Aggregate Bond Index and JP Morgan Government Bond Index emerging markets. According to FactSet's data, the yield of the 10-year Chinese bond is currently around 3.08 per cent, while its equivalent US bond's yield is just 0.67 per cent.