Long-duration fund rally may halt as yields harden on rate-cut pause

Experts don't rule out RBI intervention to keep yields in check

The sharp rally seen in long-duration funds on the back of softening bond yields and rate cuts may come to a halt, with the Reserve Bank of India (RBI) holding back from another rate cut and inflationary pressure rising.

Domestic yields on 10-year government securities (G-secs) have started to harden. On Tuesday, yields ended marginally higher at 5.95 per cent. Since the RBI’s no rate-cut stance on August 6, yields are up 14 basis points.

The consumer price index-linked (CPI) inflation for July was 6.9 per cent, against 6.23 per cent in the previous month.

Experts say it is not just inflation, but