MF Corner: What should debt investors do when bond yields rise?

Governments borrow money to conduct their business. In this year's budget, the government announced it would increase the current year's borrowing by Rs 80,000 crore and that borrowing would be on the higher side next year as well.

This immediately meant that there would be more supply of government bonds because they will borrow against these bonds. This easy availablity of bonds would therefore suppress the price and cause a spike in yields.

So, why does that matter to a mutual fund investor? As bond prices and yields are inversely related right, this means that if one goes up, the other must come down and vice versa. In current situation yields have gone up and prices of bonds have gone down and they have taken the debt funds net asset value (NAVs) lower with them as well.