Last updated: 24 Aug, 2020 | 03:49 pm
India’s 10Y G-sec yield has risen to 6.221% from 5.826% in the past 20 days. The primary reason for this is the higher inflation expectation.
How does the increase in G-sec affect you?
The View forward:
As stated in previous advisory notifications, the current economic and monetary conditions point to a bottoming of the current interest rate cycle and rates should increase in the long term (1-3 years)
This is exactly what happened post-2008 global recession. During the crisis, RBI reduced interest from 9% to 4.75% in a span of 1 year. Then as inflation picked up, rates started increasing.
Switch to low duration debt funds that have a 100% allocation to AAA-rated debt papers. Low duration will help you combat volatility much better and are likely to outperform long duration funds in the long term.
Find below a list of your high duration (duration > 3) debt funds.
Note: Please keep in mind credit quality, taxation and exit load before switching.
Have more questions on the issue? Click on the Ask Advisor button to connect with your family wealth office to help you understand more about the current risk in the system and help you manage your portfolio.