Speculation over the possible inclusion of Indian government securities on Bloomberg’s global bond index has imparted volatility to the domestic debt market, causing the 10-year benchmark yield to swing close to a tenth of a percentage point.

Market sources have revealed that at a recent meeting with the advisers to the Bloomberg index, some investors expressed concerns over the lack of necessary systems in place to facilitate trade in Indian government bonds.

While Bloomberg Index Services has not made an official announcement, speculations have surfaced since JP Morgan’s move to include Indian government securities on its index in September. This move paved the way for up to $24-25 billion of inflows in the next couple of years.

Sources claim that after the move by JP Morgan, there was increased activity surrounding the Bloomberg index. Although some large investors were in favor, many others have cited a lack of operational preparedness for trading Indian government bonds.

Starting November 16, which some market players speculate to be the day of the last Bloomberg index committee meeting, the yield on the 10-year benchmark government bond has swung sharply. The yield fell to a low of 7.20% on November 16, only to spike by as much as seven basis points to 7.27% on Wednesday.

While factors like the sharp drop in US Treasury yields have impacted domestic bond yields, rumors surrounding the potential inclusion of Indian government securities on the Bloomberg bond index have also contributed to the volatility.

A source stated that the Bloomberg index tracks a larger assets under management (AUM) compared to JP Morgan, and hence, the investor universe is larger for the former. It is believed that mid and smaller investors possibly have more of a say in the Bloomberg index.