MUMBAI, Sept 22 Reuters JPMorgan39;s decision to include local Indian bonds in its widely tracked emerging market debt index could boost demand for debt and push India39;s benchmark 10year bond yield to sub7 levels in the coming months, Citi said in a note on Friday.

The 10year benchmark 7.18 2033 bond yield dropped seven basis points bps to 7.0717 in early trades on Friday, the lowest for the 10year yield since July 27, compared to its previous close of 7.1443. It was last at 7.1072.

We continue to expect the 10year India bond yields to ease down to 6.80 over the coming months from the current 7.16, Citi analysts wrote.

India39;s local bonds will be included in the Government Bond IndexEmerging Markets GBIEM index and the index suite, benchmarked by about 236 billion in global funds, according to JPMorgan.

The announcement should also drive expectations of India39;s bond index inclusion announcements from other index managers such as the Bloomberg Barclays Global Aggregate Index, Citi said.

The brokerage estimates the inclusion will bring in about 2223 billion over the 10month period starting June 2024.

However, it is noteworthy that active investors and prepositioning by banks to facilitate passive index manager demand typically starts months in advance of actual inclusion.

Reporting by Siddhi Nayak; Editing by Janane Venkatraman

Source Reuters