Investors in longer-duration debt funds need to be patient

Experts say while rate cuts remain on the table, their start is likely to be delayed

-  SANJAY KUMAR SINGH

From a low of 7.01 per cent on March 11, the yield on the benchmark 10-year government security (G-Sec) rose to 7.19 per cent on April 16.

Investors who have bet on longer duration debt funds hoping for mark-to-market (MTM) gains are anxious today.

Spike driven by global factors

Global developments have contributed to the rise in the 10-year G-Sec yield. "It has been led largely by geopolitical risks, which have affected crude prices and the currency. Another factor is strong US data, which has delayed US Federal Reserve (Fed) rate cut expectations and led to a rise in US treasury yields," says Devang Shah, head-fixed income, Axis Mutual Fund.

GDP growth projections in the US are getting revised upward. Inflation is proving stubborn. Rising US bond yields are driving domestic yields up.

US rate cuts: Fewer, later

Expectations regarding rate cuts by the Fed are getting revised downward.

"The market was earlier pricing in three rate cuts this year but وو now expects two," says Pankaj Pathak, fund manager-fixed income, Quantum Asset Management Company.