JPMorgan Chase is finalising plans for a new index to track frontier market local currency bonds, sources familiar with the matter told Reuters, reflecting growing investor appetite for higher-yield and more diversified emerging market debt.
The proposed index comes 15 years after JPMorgan launched its hard-currency NEXGEM frontier bond index, and aims to provide a benchmark for local-currency debt issued by smaller economies, including countries in Africa, Asia, and Latin America. Investors have been consulted on the index’s structure over the past year, with formal announcements expected by mid-2026.
According to six money managers who spoke to Reuters on condition of anonymity, the index is likely to include between 20 and 25 countries. Egypt, Vietnam, Kenya, Morocco, Kazakhstan, Pakistan, Nigeria, Sri Lanka, and Bangladesh are expected to carry the largest weightings. Three of the managers said no single country would exceed 8% of the index, although earlier consultations suggested a potential 10% cap.
The new benchmark will only include bonds of at least US$250 million equivalent, raising questions over smaller issuers such as Zambia, which has traditionally issued smaller local-currency bonds. However, recent larger issues from Zambia could make it eligible, the sources said. Bonds included will need a remaining maturity of at least 2.5 years, following JPMorgan’s model for its broader emerging-market local currency index.
JPMorgan has not commented publicly on the initiative. One senior fund manager told Reuters that the bank is expected to provide a formal structure by June, allowing final investor input before a possible launch next year. Another source suggested an initial announcement could come as early as March.
The proposed index arrives as frontier market local-currency debt has grown rapidly, with tradable volumes estimated at around $1 trillion, according to analysis by Neuberger Berman. Frontier debt has outperformed mainstream emerging-market local currency debt by about 2.5 percentage points over the last eight years, while also surpassing emerging-market dollar-denominated bonds, highlighting the potential for higher returns.
Frontier economies, home to roughly one-fifth of the global population, account for just 3.1% of global capital flows and less than 5 percent of GDP, according to World Bank data. Their populations are expected to grow by approximately 800 million over the next 25 years, a rate faster than the rest of the world combined, underscoring their rising significance in global economic growth.
Analysts say JPMorgan’s new index could further expand local currency bond markets, which are promoted by the World Bank and International Monetary Fund as a way to reduce the risk of debt crises triggered by currency mismatches when countries borrow in hard currency.
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The index is expected to offer significant yield advantages over major emerging-market benchmarks. JPMorgan estimated in September that the index could provide around 400 basis points of additional yield over its GBI-EM index, with more than 60% of constituent bonds yielding over 10 percent.
Investors noted that potential future promotions of high-weight countries, such as Egypt and Nigeria, to the broader GBI-EM index could affect the makeup of the frontier market index and will be closely monitored.
JPMorgan’s plan reflects a broader trend among asset managers seeking to tap frontier markets’ high yields and diversify portfolios beyond traditional emerging markets, while providing investors with a formal benchmark for local currency debt in these fast-growing economies.
