Fundview: India's Bandhan AMC minimizes bond duration, sees up to 100 bps of rate hikes, exec says
FUNDVIEW-India's Bandhan AMC minimizes bond duration, sees up to 100 bps of rate hikes, exec says By Shubham Batra and Dharamraj Dhutia
NEW DELHI/MUMBAI, Oct 8 (Reuters) - India's Bandhan Asset Management will keep the duration of its government bond funds ultra-low, after cutting their weighted average maturity to less than a year, as it expects the Reserve Bank of India to raise interest rates by 100 basis points in the coming months, a fund manager said on Thursday.
"We had increased the weighted average duration to around 12 years, and tried to play the longer end... but eventually we are settled in at below one-year for now," Harshal Joshi, vice president, fixed income at Bandhan AMC, told the Reuters Trading India forum.
The fund house manages about 960 billion rupees ($9.92 billion) of debt assets and was among the early proponents of investing in 30-year government securities.
"Bond yields should slowly drift higher as we go ahead with more rate hikes and maybe more steps on liquidity absorption, so the trading band for the 10-year bond yield should move towards 7.20%-7.40%."
The 10-year benchmark bond yield IN069436G=CC was at 7.29% on Thursday, a day after the Reserve Bank of India raised its key policy rate by 25 basis points to 5.50%, along with changing its policy stance to calibrated tightening from neutral, hinting at more rate hikes.
Bandhan AMC sees the repo rate settling around 6.25%-6.50%, with the RBI likely reaching that level over the next three policy meetings, given the global economic backdrop.
The RBI's rate hike comes after similar moves by the Federal Reserve as well as central banks in emerging market peers such as the Philippines and Indonesia.
Joshi said the fund house would consider adding longer-duration bonds when economic fundamentals turn more favourable, rather than simply because yields reach a certain level.
On corporate bonds, Joshi noted that debt maturing in two to three years is offering wider, more attractive spreads over corresponding government bonds and the policy repo rate.
($1 = 96.7900 Indian rupees)
(Reporting by Shubham Batra in New Delhi and Dharamraj Dhutia in Mumbai; Editing by Ronojoy Mazumdar)
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Fundview: India's Bandhan AMC minimizes bond duration, sees up to 100 bps of rate hikes, exec says