Now Reading: Bond yields above 7%: Axis MF sees sweet spot in 3-5 year debt
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Bond yields above 7%: Axis MF sees sweet spot in 3-5 year debt
India's 10-year government bond yield crossed 7% to stand at 7.073% on September 15, according to TradingView. The yield rose from around 6.81% at the start of August as higher crude oil…
India's 10-year government bond yield crossed 7% to stand at 7.073% on September 15, according to TradingView. The yield rose from around 6.81% at the start of August as higher crude oil prices, inflation concerns, and uncertainty over global interest rates weighed on the bond market, Axis Mutual Fund said in its September fixed income report.
Axis MF has an overweight view on 3-5-year corporate bonds and select State Development Loans, citing attractive carry, ample liquidity, and limited certificate of deposit issuance. The fund house remains cautious on long-duration debt, warning that high state borrowing, fiscal pressures, and the potential impact of the 8th Pay Commission could keep yields elevated.
Key risks to watch include prolonged geopolitical tensions, crude oil prices moving above $100 a barrel, rupee depreciation, and a hawkish US Federal Reserve policy stance. Axis MF expects the 10-year G-sec yield to remain broadly range-bound in the near term.
Indian Opinion Analysis
The 7% mark on the 10-year G-sec yield is a psychological threshold for Indian debt markets, last seen consistently in 2018-19. For debt fund investors, the 3-5 year segment offers a compromise between income and interest-rate risk: yields are elevated but duration is short enough that a 25-basis-point rate hike would not cause double-digit capital loss, unlike a long-duration fund. The RBI's rate-setting committee next meets on October 4-6, and its decision will signal whether the current yield level is a buying opportunity or a warning. A hold would support the case for accrual strategies, a surprise hike could push long-end yields above 7.3%.
The RBI's rate-setting committee next meets on October 4-6. Its decision will determine whether the current yield level is a buying opportunity or a warning.
Source: livemint.com
This brief was synthesised by AI from the source linked above.
