With yields hardening, its best to opt for shorter-duration funds

Shorter-maturity bonds in these funds get reinvested at higher coupon rates

On Monday (October 11), the 10-year government bond yield closed at 6.35 per cent, a level it had touched 18 months earlier (on April 17, 2020). As yields rose, the net asset values of many longer-duration bond funds registered decline.

End of assured bond-buying

The immediate reason for the spike in yields was the Reserve Bank of India’s (RBI's) policy announcement discontinuing its G-Sec Acquisition Programme (G-SAP).

“The absence of assured bond purchase in this quarter has created pressure at the longer end of the yield curve,” says Pankaj Pathak, fund manager-fixed income, Quantum Mutual Fund. The discontinuation of G-SAP took the market