J.P. Morgan is giving Morocco a high weight in a new global bond index that will track government debt from 26 frontier economies. The GBI-EM Edge will launch before the end of September and will cover nearly $330bn in local-currency government bonds. J.P. Morgan has not yet said exactly how much of the index will be made up by Moroccan bonds. It has put Morocco in the same top group as Egypt, Vietnam, Kazakhstan, Bangladesh, Pakistan, Nigeria and Sri Lanka.
No country can have a weight above 8%. Vietnam, Kazakhstan, Pakistan and Bangladesh will each have an 8% weight. Morocco’s final share has not been confirmed.
The index will only include government bonds with at least $250m in outstanding debt and more than two-and-a-half years left until maturity.
For Morocco, the index will cover government debt issued in dirhams. Bonds issued in euros or dollars will not be included.
The new index will give dirham-denominated government bonds a global benchmark followed by investors. It could make the debt easier for international investors to track, but it does not guarantee new investment.
J.P. Morgan says many of the countries in the index “resemble strongly the major emerging markets of the early 2000s”.
Africa will make up nearly 45% of the index. Frontier markets in Asia will account for almost one-third.
The World Bank says these economies attract only 3.1% of global capital flows and produce less than 5% of global output, despite representing about one-fifth of the world’s population.
The new index is expected to have a nominal yield of about 10.4%. That is around 440 basis points higher than J.P. Morgan’s main index for local-currency emerging-market debt.
Nine-year back tests also show an annual return about 1.2 percentage points higher than the existing benchmark.
Thomas Christiansen, head of emerging-market fixed income at Union Bancaire Privée, said: “This index probably would not have been possible ten years ago.”
Local bond markets in several of the countries included have become deeper and easier for foreign investors to access.
The IMF puts central government debt at 67.1% of GDP at the end of 2025. It says the debt is “sustainable with a high probability” and puts the risk of sovereign stress at a moderate level.
The new index comes nearly 20 years after J.P. Morgan launched NEXGEM, which tracks frontier-market debt issued in major foreign currencies.
Local-currency emerging-market debt has tripled over the past decade and is now close to $1trn. J.P. Morgan plans to include almost one-third of that market in the new index.
The bank describes the market as offering “high nominal yields, improving market infrastructure and periodic episodes of volatility”.
