How did the global debt market behave in May-21?
Last updated: 09 Jun, 2021 | 03:11 am
- Unlike the previous months, Bond Yields cooled off across all the markets moderately, as apprehensions over the pace of economic rebound weighed.
- While the economic reopening is leading to recovery, but supply chain issues and increase in raw material costs are throttling the pace of rebound.
- This fuelled safe-haven demand for government securities, tempering their yields. Additionally, the asset purchase programme by the central banks has been limiting the rise in yields across economies.
- Although yields came off from the highs touched in Mar-Apr’21, it continues to be well above the pre-pandemic levels across economies.
Impact on debt funds in India
- Due to their higher sensitivity to yield changes, longer duration funds have been impacted in the last one week period.
- India’s 10-year benchmark bond had trended slightly upward towards the end of the month. This has led to funds with higher duration seeing negative returns in the period.
- Money Market, Ultra-short, Liquid Funds have remained largely unaffected to changes in yields due to their lower duration.
Stick to high-quality AAA-rated low-duration funds and bonds. Prefer safety over high yields in this volatile market. In fixed income securities, high risk does not mean higher returns.