Gilt funds lose steam after RBI pause on rate cut triggers yield spike

In the one-year period, gilt funds had outperformed most other debt categories with gains of over 10 per cent

The strong rally seen by gilt funds might come under pressure, following the surprise move by the Reserve Bank of India (RBI) to bring a halt to its policy rate-cut moves to give a fillip to economic growth.

Gilt and other government security funds, on Thursday, saw their net asset values (NAVs) decline between 0.6 and 1.1 per cent after the RBI’s pause on rate cuts triggered a spike in G-Sec yields. The yield on 10-year government bond rose 11 basis points, which was the sharpest since September 20.

Market experts say that investors will need to temper their return