According to the official announcement on the J.P. Morgan web site, The Republic of Serbia will join the GBI-EM Global Diversified Index in June 30, 2021.
Three of RSD benchmark bonds with maturity on January 11, 2026 (RSMFRSD89592), February 6, 2028 (RSMFRSD55940) and August 20, 2032 (RSMFRSD86176) are eligible for the GBI-EM GD with an estimated weight of 0.33%.
As reported by J.P Morgan, June 30th, 2021 will see the inclusion of Serbia's dinar-denominated government bonds (SERBGBs) across the GBI-EM index family, including the widely benchmarked GBI-EM Global Diversified. Currently, three SERBGB bonds (26s, 28s, 32s) are eligible for inclusion into the index as they meet the index liquidity, minimum outstanding amount (at least US$1 billion equivalent) and remaining maturity criteria (greater than 2.5 years; i.e. matures after December 31st, 2023).
Serbia's weight is estimated to be approximately 33 bps in the GBI-EM Global Diversified. At inclusion, Serbia is expected to have an average yield of 2.9% with a duration of 6.1years.
The country's inclusion will likely have minimal impact on headline index yield and duration given its low expected weight within the index. Serbia currently has a JESG score of 45.6, which places the country in the middle of the JESG band scale, Band 3. As a result, Serbia's weight in the ESG-aligned GBI-EM (JESG GBI-EM) is expected to be 32 bps, in-line with the baseline GBI-EM GD.
While pandemic-related disruptions and market volatility impacted the overall liquidity and accessibility of emerging market currencies and government bonds, market participants agree that liquidity in Serbian government bonds has returned to pre-pandemic levels. Over the years, Serbia has focused on a benchmark building program and increasing the size of individual instruments by frequently tapping them, aiding overall liquidity. Accessibility and secondary market liquidity will see further improvement as Serbia works towards achieving Euroclearability, as reported in the announcement.