Chinese sovereign debt makes a splash in major indexes

Posted on Apr 2, 2021 8:15 AMUpdated Apr 2, 2021, 9:29 AM

It is a juggernaut that will integrate the World Government Bond Index (WGBI), one of the three most renowned indices for sovereign debt. FTSE Russel confirmed earlier this week that it would include Chinese government debt in its flagship index. A real revolution. The Chinese bond market is the second largest in the world, but Chinese bonds were previously not taken into account.

A situation which can be explained in large part by its fairly recent opening to foreign investors, and by the need to adapt its mode of operation to meet the requirements of the index. Among the major stages of the work, “Beijing had to improve liquidity on the secondary market, restructure its foreign exchange market and set up clearing and settlement mechanisms,” say Deutsche Bank strategists.

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