Rebound in yields leads to strong flows into shorter-horizon debt funds

Schemes see strong inflows for two-consecutive months as yields surge, interest rate risks fade

The Covid winter seems to be finally ending for debt-oriented mutual fund (MF) schemes as interest rates peak, especially for those that invest in shorter-maturity papers. In the past two months, shorter-horizon debt schemes — ultra-short, low-duration, and money-market — have together raked in net inflows of Rs 48,000 crore, the highest for two months since April-May 2021.

These schemes invest in shorter-maturity papers ranging from three months to a year. Owing to the shorter duration, these schemes’ interest-rate risk is lower than longer-horizon debt schemes. These schemes are used mainly by institutional investors and high networth individuals (HNIs) for