Under the new rule all indexes containing JGBs will exclude privately placed bonds. That would result in a decrease of the JGB weighting from the current 18.4% to 15.3%, according to the investment bank.
Recent months have seen an increase in the weightings of JGBs in indices, prompting foreign portfolio managers to invest in Japan?s sovereign bonds, despite low yields, in a bid to keep up with the benchmark.
In addition, liquidity constraints for JGBs in the Asian Pacific Aggregate Index are expected to increase from ¥20 billion to ¥35 billion. This change however, will not affect the Global Aggregate Index, which already has a ¥35 constraint.
– Camilla Klein email@example.com