LONDON: JPMorgan is finalising plans for a new index to track frontier market local currency bonds, according to investors consulted by Reuters. The move comes as demand grows for higher-yield and more diversified debt in global markets. The index initiative arrives 15 years after JPMorgan launched its hard-currency Next Generation Markets Index (NEXGEM) and coincides with a year-long slump in the dollar, alongside notable rallies in markets such as Argentina, Ecuador, and Uganda. JPMorgan declined to comment on the plans.
Six senior money managers told Reuters that discussions with JPMorgan reached an advanced stage in the second half of 2025. The proposed index is expected to include 20 to 25 countries, with Egypt, Vietnam, Kenya, Morocco, Kazakhstan, Pakistan, Nigeria, Sri Lanka, and Bangladesh having the largest weightings, according to three of the managers. Sources indicated that no single country would hold more than 8 percent of the index, although earlier consultations suggested a 10 percent cap. Bonds included in the index are expected to have a minimum size of $250 million equivalent. This requirement has raised questions about Zambia, which traditionally issues smaller bonds, though recent larger issuances may make it eligible.
Investors anticipate that JPMorgan will release a formal structure for the index around June, with opportunities for final feedback. The index is expected to launch formally next year, although an initial announcement could come as early as the end of March 2026. Analysis by Neuberger Berman indicates that tradable local-currency debt has grown threefold over the last decade, reaching roughly $1 trillion. Frontier market local FX debt has outperformed JPMorgan’s broader emerging market local currency index by almost 2.5 percentage points over the past eight years, as well as the EM dollar bond index. Rob Drijkoningen of Neuberger Berman noted that this trend confirms frontier market growth and economic performance have been systematically underpriced. Frontier economies represent around 20 percent of the global population but account for just 3.1 percent of global capital flows and less than 5 percent of global GDP, according to the World Bank. Their populations are expected to grow by 800 million over the next 25 years, surpassing growth in the rest of the world combined.
Analysts expect JPMorgan’s index to expand frontier market local currency bond markets, a development supported by the World Bank and IMF as a way to reduce debt crises caused by currency mismatches in hard-currency borrowing. The proposed index requires bonds to have more than 2.5 years until maturity and could provide a yield “pick-up” of roughly 400 basis points over the GBI-EM index, with more than 60 percent of constituents expected to yield above 10 percent. Some investors noted that potential future promotions of top-weighted countries like Egypt and Nigeria into JPMorgan’s GBI-EM index could change the index’s composition, making clarity on these rules important.
With confidence in traditional developed market debt shaken, capital is increasingly flowing into frontier markets. JPMorgan’s new index is likely to become a key benchmark for investors seeking high-yield, diversified local currency exposure, while supporting long-term growth and financial development in emerging economies.
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