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In March, the 10-year g-sec yield remained flat and hovered around 7-7.10% throughout the month. Also, the announcement of inclusion of Indian bonds in JP Morgan's indices from June has warmed up fixed income investors.
What would be its impact on debt markets in the coming month? Let’s find out what our industry experts, Alok Singh, CIO, Bank of India MF, Sushil Budhia, Senior Fund Manager–Fixed Income, Nippon India MF and Vikrant Mehta, Head-Fixed Income, ITI MF have to say about the debt market outlook for April.
Alok Singh, CIO, Bank of India Mutual Fund
Outlook
- Anticipated inflows in government bonds driven by their inclusion in global bond indices will bolster demand and consequently, push bond yields downwards
- Expect 10-year G-Sec to remain in the range of 6.95%-7.10%
- The short end of the curve should start easing off as liquidity in the system increases
- The overnight rates to be around the repo rate of 6.5% against the current overnight rate of 6.75%
- This will also allow moderation in the short end of the curve by 25–35 bps
Funds Recommended
- Medium term funds are better placed in terms of risk-reward perspective in the near term
Sushil Budhia, Senior Fund Manager – Fixed Income, Nippon India Mutual Fund
Outlook
- US Treasuries have been range-bound between 4.10% to 4.30%
- Approximately 60% of the market anticipates a rate cut by the FED in the June policy
- In India, inflation stands at 5.09% while the core CPI has decreased further to 3.34%
- Market expectations suggest a continuation of range-bound behavior with a tendency towards lower yields on the 10-year G-sec
- Bull steepening is anticipated in the 10-year curve with the current high absolute yield offering favorable risk-adjusted returns in the short tenor of the curve
Funds Recommended
- Ultra-short category funds (money market funds, low duration funds and ultra-short duration funds) are suitable for investors with an investment horizon of up to 1 year
- Short-term category funds (short term funds, banking and PSU funds and corporate bond funds) are recommended for investors with an investment horizon exceeding 12 months
Vikrant Mehta, Head – Fixed Income, ITI Mutual Fund.png)
Outlook
- After a good start to the year in January 2024, bond markets were hoping for the momentum to continue in February
- The interim budget was cheered by the bond markets – with a lower-than-expected fiscal deficit of 5.1% of GDP and less than anticipated gross market borrowings in government bonds, bond yields eased across the curve
- The RBI’s objective to keep the overnight rate around the repo rate and the Central Bank’s commitment to remain nimble and flexible on liquidity management
- Global markets may well be running ahead of central bank talk and guidance; however, India’s bond market appears to be in a sweet spot
- Indian sovereign bonds will be included in a staggered manner from June 2024 in the JP Morgan Emerging Market Government Bond Index (GBI-EM), and this has the potential to attract around USD 25B
Funds Recommended
- Banking & PSU debt funds will benefit from an expected decline in interest rates
