DEBT INSTRUMENTS (Syllabus: GS Paper 3 – ECONOMY)

Context: JP Morgan announced that India will be incorporated into the GBI-EM Global index suite and all relevant derivative benchmarks, including custom indices.

Emerging Markets Bond Index (EMBI)

• About: EMBI tracks the performance of emerging market bonds.
• Published by: Investment bank JP Morgan.
• Emerging Market Bonds: This is  debt instruments issued by developing countries, offering higher yields compared to government or corporate bonds from developed nations.
• EMB Indexes: Serve as benchmarks for evaluating bond performance within emerging markets.

Debt Instruments

• About: A debt instrument is any financial tool used to raise capital. It is a documented, binding obligation between two parties in which one party lends funds to another, with the repayment method specified in a contract.
• Types/examples: Bond, certificate of deposits (CoD), Commercial Papers.

Bonds

• About: Bonds are income instruments issued by governments and corporations when they want to raise money.
• Examples: Corporate Bonds, Municipal Bonds, Government Bonds and Agency Bonds.