JP Morgan has launched a bond index that it says is aimed at global government bond managers looking to increase their allocation to emerging markets.
The index, named JPM GBI Aggregate Diversified (GBI-AGG Div), does not exclude countries based on credit ratings and therefore includes both investment grade and high yield investable markets. However, the index does exclude countries with capital controls.
Instead, the index’s diversification will be currency based as opposed to traditional diversified benchmarks that restrict at the country or issuer level. The currency diversification results in an 80% and 20% weighting for developed market and emerging market currencies, respectively.
One of the issues with global government bond indices is that a large proportion includes negatively yielding bonds as they are configured using a market cap methodology. The proportion of negative yielding securities is 40% lower in the GBI-AGG Div compared to the traditional market cap weighted benchmark.
The weighted average yield of the GBI-AGG Div is 1.35%, which is more than twice the average yield of other publicly used global government bond indices according to the firm.
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