Singapore Exchange (SGX) has conducted numerous discussions with treasury officials from international banks regarding the potential launch of futures contracts linked to specific Asian government bond markets, according to sources with knowledge of the situation.
The exchange explored the introduction of these futures for nations such as India, Indonesia, Malaysia, the Philippines, and Thailand, the sources revealed, requesting anonymity due to the private nature of the talks. These instruments enable investors to manage their risk against interest rate fluctuations by agreeing to buy or sell bonds at a predetermined future date on an exchange.
These deliberations highlight the increasing investor appetite for the region's debt markets. Indian bonds have been progressively included in major global indices over the past 18 months, while Malaysian securities were highly favored by investors last year, achieving the most robust performance among emerging Asian markets.
For the proposed futures products, SGX discussed offering contracts with three-year, five-year, and ten-year maturities for each country, the people indicated. The futures would be settled in US dollars, with their pricing derived from the average yield of a basket containing no more than three sovereign bonds.
Regarding India, the bonds most likely to be selected would be those falling under the Fully Accessible Route (FAR) framework, which qualifies them for inclusion in global indices. Since Indian bonds were added to JPMorgan Chase & Co.'s flagship index in June 2024, overseas investors have injected $21 billion into the nation's sovereign debt, data from a clearing house shows.
SGX is targeting the launch of these futures in the first half of 2026, with a potential launch as early as the first quarter, the sources added, cautioning that the discussions are in preliminary stages and specific details are subject to change.
