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Yield-to-maturity of debt funds now similar across durations, shows data

Mismatch in YTM growth because shorter-end of yield curve more responsive to rate changes, say experts

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Debt mutual funds have seen continued outflows owing to the poor performance over the past year and the rate hike cycle

Abhishek Kumar Mumbai
The yields being offered by debt funds are now similar across categories, with the yield-to-maturity (YTM) of shorter-horizon funds rising at a faster pace than medium-to-longer-horizon funds.
 
In December, the YTM of overnight funds rose by 77 basis points (bps), while medium-to-longer-horizon funds like corporate bond and gilt saw YTMs rise by just 5-10 bps.
 
Experts said the mismatch was because the shorter-end of the yield curve was more responsive to interest rate changes than the medium-to-longer-end of the yield curve.
 
“The yields of short-term debt instruments are directly linked to the repo rate. That’s why they go up with every rate hike.

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First Published: Jan 19 2023 | 11:32 PM IST

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