homemarket NewsAre debt funds a good investment in volatile market? ICICI Securities has the answer

Are debt funds a good investment in volatile market? ICICI Securities has the answer

Lower yield is good news for debt mutual fund investors, especially those in long-duration bond funds as interest rates and bond prices tend to share an inverse relationship.

Profile image

By Pranati Deva  Sept 18, 2019 10:01:43 AM IST (Published)

Listen to the Article(6 Minutes)
Are debt funds a good investment in volatile market? ICICI Securities has the answer
Indian debt market witnessed a rally last year with benchmark 10-year G-Sec yield correcting to around 6.5 percent from 8 percent in September 2018. A similar 150 basis points fall in corporate bond yields was also witnessed in good quality corporate bonds.

Share Market Live

View All

Lower yield is good news for debt mutual fund investors, especially those in long-duration bond funds as interest rates and bond prices tend to share an inverse relationship.
Overall, according to a report by ICICI Securities, short-term funds or corporate bond funds, which have not witnessed any downgrades delivered returns of around 10 percent in the last one year. Meanwhile, duration funds delivered returns in the range of 14-15 percent last year, it added.
The US 10-year sovereign yield currently at 1.5 percent is near its all-time low. Sovereign yields of many countries are trading in negative territory. All these support lower yields in other emerging markets as well, the brokerage stated.
The brokerage believes the recent uptick in yields by around 25 bps due to concerns over fiscal slippage and uncertainty surrounding global sovereign bond offers a good investment opportunity in debt funds. Investors should lock debt funds at higher rates as they expect further rate but by RBI and compression in G-Sec and corporate bond yield, which will in turn give better returns.

Most Read

Share Market Live

View All
Top GainersTop Losers
CurrencyCommodities
CurrencyPriceChange%Change