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JPMorgan Emerging Markets Bond Indices and the Argentina debt exchange

November 8, 2001
JPMorgan Emerging Markets Bond Indices and the Argentina debt exchange

New York, November 8, 2001 - JPMorgan Chase announced today likely changes in the composition of JPMorgan Emerging Markets Bond Indices, based on currently available information on Argentina's upcoming debt exchange.

JPMorgan understands the key terms of Argentina's upcoming debt exchange to be:

  • Existing index bonds will be exchangeable for Guaranteed Loans
  • The exchange will target domestic investors
  • The tendered bonds will not be cancelled, but will be held in custody at the Central Bank. In the event of a default or international exchange, the tendered bonds would revert to the domestic investors so that they are not at a disadvantage to international investors who hold the bonds at the time of the default or exchange.

The exchange will lower the outstanding amounts of (tendered) bonds available to international investors. A similar situation results from "open-market" bond purchases and sales by central banks. Where these transactions are publicly disclosed, as in the case of the US Treasury and Japanese Government Bond markets, outstandings in the JPMorgan Government Bond Index are adjusted accordingly, to reflect what can be held by investors.

Based on our understanding of the terms of the exchange, the composition of the EMBI, EMBI+, EMBI Global, EMBI Global Constrained and LEI will adjust as follows:

  1. Outstanding bonds that are currently in an index and are tendered for exchange will be removed from the relevant index, in the amounts reported in the announcement of the results of the exchange.
  2. The exchange may trigger an intra-month rebalancing of our indices, as dictated by existing index rules.
  3. The Guaranteed Loans that are exchanged for index bonds will be included in the indices if they satisfy the existing index rules, which include availability of prices, and international settlement.

These adjustments to index composition are based on our current understanding of the terms and nature of the exchange, and may need to be revised in the event further information from the Republic of Argentina becomes available.
The bond and country inclusion rules for JPMorgan's family of Emerging Markets Bond Indices are described in:

Introducing the Emerging Markets Bond Index Plus (EMBI+)

Introducing the JPMorgan Emerging Markets Bond Index Global (EMBI Global)

Intra-Month Rebalancing Methodology

These publications are available from the JPMorgan website, www.morganmarkets.com.