Russia’s Exit from Bond Indexes to Trigger Portfolio Rebalancing

Russia’s dismissal from global bond indexes has deepened the country’s financial isolation, and will have broad geographical ramifications for credit investors, with funds reallocated to other issuers.

Fixed income in India, the Middle East and Southeast Asia is likely to benefit, according to Lombard Odier. Credit default swaps on Russian sovereign debt, meanwhile, are now signaling an 80% chance of default.

JPMorgan Chase & Co. became the latest benchmark provider to remove Russian bonds from its gauges, which are tracked by assets worth hundreds of billions of dollars. The move comes as much of the global financial sector severs ...