INSUBCONTINENT EXCLUSIVE:
By Bhavana AcharyaPortfolio yields across debt fund categories have been climbing higher in last three months
Short-term funds may invest in papers of 1-2 year maturities and so on.
Across debt fund categories, their average portfolio yield-to-
maturity was dropping lower through 2016
Yield-to- maturity (YTM) is the return that the portfolio would earn if all the bonds in it were held until maturity
It reflects the coupon or interest on the underlying papers.
Rate cuts, prospects of further cuts, abundant liquidity all served to send
While dynamic bond funds benefited from this due to bond price rallies, accrual-based funds saw their portfolio YTMs moving lower as
interest rates moved lower
While average YTM stayed somewhat steady, if at lower levels, in early 2017, they began moving further down from mid-2017 onwards.
Many
short-term and ultra short-term funds had, in fact, tried to shore up their YTMs by going in for lower-rated but higher-coupon debt
papers.
Portfolio yields are improvingIn the short-term category, for example, more than half the funds sport portfolio YTMs above 8 per
The last time short-term funds had an 8 per cent -plus average was in June 2016
The average for the category is 8.08 per cent for February against the 7.39 per cent in November last year.
Ultra short-term funds had an
average 8.01 per cent yield in February compared to 7.22 per cent in November 2017
Even dynamic bond funds saw a lift in their portfolio YTMs as they shifted away from duration and into accrual as prospects of further bond
price rallies faded.
(Bhavana Acharya is a Mutual Funds Analyst at FundsIndia.com
Views given in this article are the analyst's own and do not represent those of ETMarkets.com
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