Bond Not The Best
Business Today|March 25, 2017

Rising yields mean bond fund portfolios will be under pressure for a considerable time period.

Jigar Pathak
Bond Not The Best
Rising bond yields and the resulting treasury losses are telling on profitability of banks. Yield on the benchmark 10-year government securities (G-sec) surged 67 basis points (bps) during the third quarter due to fiscal worries. To be sure, these are mark-to-market, or MTM, losses on investment portfolios that can be reversed if the yields correct. But experts think there is a larger concern. “Banks are not actively participating in the market. This is driving up yields,” says Dwijendra Srivastava, who oversees around ₹18,000 crore in various debt schemes as Chief Investment Officer, Debt, Sundaram Asset Management Company.

Once Bitten, Twice Shy

The one-side movement of bond yields since September last year is troubling bankers. Banks are apprehensive of committing more investments as they fear more losses if yields further harden from here.

According to ratings agency ICRA, the yield on the old 10-year government of India security (6.79 per cent GS 2027) had increased by 123 basis points (bps) to 7.72 per cent on February 14, 2018, from 6.48 per cent on September 1, 2017. Moreover, the yield on the new 10-year benchmark G-Sec (7.17 per cent GS 2028) rose from 7.17 per cent, when it was first issued in January 2018, to 7.60 per cent on February 1, 2018, before easing somewhat to 7.49 per cent as on February 14, 2018. “There is clearly a demand-supply mismatch,” says Srivastava. “If government front loads its expenditure, it will also front-load its borrowing. We should not forget that it’s a pre-election year. Banks need to come back (to the market). At the policy level, a lot of engagement will be needed,” he says.

This story is from the March 25, 2017 edition of Business Today.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

This story is from the March 25, 2017 edition of Business Today.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

MORE STORIES FROM BUSINESS TODAYView All
"Moving to cloud helped us grow❞
Business Today India

"Moving to cloud helped us grow❞

What was the problem you were grappling with?

time-read
1 min  |
November 24, 2024
She's Got Time
Business Today India

She's Got Time

MORE WOMEN ARE BECOMING WATCH CONNOISSEURS, SEEKING OUT BOTH JEWELLED AND TECHNICAL WATCHES FOR THEIR STYLE AND CRAFTSMANSHIP

time-read
3 mins  |
November 24, 2024
RISING STAR
Business Today India

RISING STAR

PARUL GULATI IS a name that's been steadily gaining prominence in the Indian entertainment industry after she appeared on season 2 of Shark Tank in 2023. She has become a multifaceted personality who effortlessly transitions between acting and entrepreneurship.

time-read
1 min  |
November 24, 2024
Building on a Legacy
Business Today India

Building on a Legacy

WHEN ZAHABIYA KHORAKIWALA stepped into her role as Managing Director of Wockhardt Hospitals over a decade ago, she confronted formidable challenges that have since turned into achievements.

time-read
1 min  |
November 24, 2024
LEADER IN INNOVATION
Business Today India

LEADER IN INNOVATION

AS FEDEX'S PRESIDENT (Middle East, Indian subcontinent and Africa), Kami Viswanathan has a lot on her plate.

time-read
1 min  |
November 24, 2024
WAITING IN THE WINGS
Business Today India

WAITING IN THE WINGS

Here are those who missed out as they have not yet completed a year in office; they'll be strong contenders in 2025

time-read
1 min  |
November 24, 2024
A DECENT PROPOSAL
Business Today India

A DECENT PROPOSAL

IN TODAY'S WORLD OF TRYING TO CREATE AN EQUITABLE SPACE, BOTH MEN AND WOMEN CONTRIBUTE TO THEIR HOUSEHOLDS. WOMEN ARE ENCOURAGED TO HAVE THEIR OWN SAVINGS POOL AND INVESTMENT ROUTINE. GIVEN THIS, HOW SHOULD FUTURE BRIDES APPROACH FINANCIAL PLANNING?

time-read
5 mins  |
November 24, 2024
Women and the STEM Bias
Business Today India

Women and the STEM Bias

EMPOWERING WOMEN IN STEM WILL NOT ONLY BENEFIT INDIVIDUALS, BUT ALSO STRENGTHEN THE ENTIRE INDUSTRY, DRIVING INNOVATION AND PROGRESS.

time-read
3 mins  |
November 24, 2024
ROCKET WOMEN
Business Today India

ROCKET WOMEN

WOMEN IN INDIA ARE NOT ONLY VENTURING INTO SPACE BUT ARE ALSO STARTING TO SPEARHEAD THE COUNTRY'S EFFORTS IN THE GLOBAL SPACE RACE.

time-read
6 mins  |
November 24, 2024
ONE STEP FORWARD
Business Today India

ONE STEP FORWARD

THE NUMBER OF WOMEN INDEPENDENT DIRECTORS IS GROWING STEADILY, BUT IT'S A LONG WAY FROM GENDER PARITY. MUCH MORE NEEDS TO BE DONE TO BREAK THE GLASS CEILING IN BOARDROOMS.

time-read
6 mins  |
November 24, 2024