At a time when the US Fed has cut interest rates by 50 basis points, domestic investors should increase exposure to long-duration bonds because of falling yields. Gilt and dynamic bond funds can take advantage of the potential capital appreciation as bond prices rise with falling yields, say experts.
Long-duration bonds will benefit the most in a declining rate environment. In fact, the Fed’s aggressive stance on easing rates, combined with India’s potential for rate cuts, creates a favourable environment for long-duration bonds.
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