Uzbekistan soum bonds to enter J.P. Morgan emerging markets index
Uzbekistan’s soum-denominated sovereign bonds will officially enter the J.P. Morgan Government Bond Index-Emerging Markets at the end of September, the Ministry of Economy and Finance announced.
The upcoming inclusion positions Uzbekistan as the exclusive Commonwealth of Independent States member to have its local currency debt represented on the benchmark. The GBI-EM serves as a critical guidepost for international investors who manage emerging market assets exceeding $300bn. The index currently tracks government bonds from 20 developing nations worldwide.
The addition follows a major financial operation earlier this year when the government issued three-year bonds totalling 12.2trln soums with a 12.25% interest rate. Financial authorities noted this issuance was the largest local currency sovereign transaction across Central and Eastern Europe, the Middle East and Africa in 15 years.
Market impact and credit upgrades
The Ministry of Economy and Finance expects the index entry to attract a wider pool of foreign investors and secure more favourable sovereign borrowing conditions. Officials pointed to Paraguay’s previous inclusion in the GBI-EM as a practical precedent, noting that the Latin American nation saw its borrowing rates fall by up to one percentage point.
This aligns with a series of positive international evaluations regarding Uzbekistan’s financial stability. Major global credit agencies Fitch and S&P recently upgraded the country’s rating from BB- to BB, whilst Moody’s elevated its own assessment from Ba3 to Ba2. Evaluators attributed these upward revisions to a strengthening domestic economy, growing international currency reserves and strictly enforced fiscal discipline.
Local metrics
Domestic financial metrics mirror this international optimism. The average yield on state securities dropped significantly, falling from 17.1% in 2022 to 12.6% during the first half of this year. The average maturity period for these securities simultaneously extended from 1.5 to 2.35 years. Medium-term treasury bonds dominated the sector during the first six months of the year, representing 69% of all government paper issuances and 63% of secondary market transactions.
To accommodate the anticipated influx of foreign capital, Raiffeisen Bank International recently launched dedicated securities custody and accounting services in Uzbekistan. The new infrastructure is designed to streamline administrative operations for international investors trading Uzbek sovereign bonds.
