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As yields head north, time to exit long duration debt funds

Dan Neff
As yields head north, time to exit long duration debt funds

HSBC expects the 10-year benchmark to rise to 7.5% by the second quarter of 2022 and 7.8% by the fourth quarter of 2022 on the back of higher-than-expected issuances of government securities.

Synopsis

Bond yields rose after finance minister Nirmala Sitharaman, in the budget on Tuesday, announced a fiscal deficit target of 6.4% for next year and increased capital expenditure of ₹7.5 lakh crore. The 10-year benchmark rose 19 basis points in the last couple of days and touched 6.88%. It has risen by 100 basis points over the last year. Fund managers expect yields to continue their upward march in the next year.

Mumbai: Fund managers and investment advisors are recommending investors to square off their holdings in long-duration bond funds and gilt funds as bond yields are expected to firm up over the next year.

The money could be reallocated to liquid funds or short-tenure bonds. Investors with a higher appetite for risk could allocate about 10% of their fixed income portfolio to credit risk funds.

Bond yields rose after finance minister Nirmala

BY

ET Bureau

4 mins read, Last Updated:

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