Fundview: Better value in medium term 10–15 year India bonds, says ICICI Prudential Life

Icici Prudential Life Insurance

27/03/2026 07:31

By Dharamraj Dhutia

MUMBAI, March 27 (Reuters) - ICICI Prudential Life Insurance ICIR.NS has been trimming exposure to ultra-long government bonds in favour of the medium duration 10–15-year segment and will continue this shift in the near term, a fixed income executive said.

The insurer sees this segment offering a better balance of returns and liquidity than ultra-long bonds.

"Our primary preference remains with government bonds in the 10-year to 15-year segment, as we maintain a cautious stance toward the long end of the curve," said Vidya Iyer, head fixed income at the life insurance company that manages debt worth 1.84 trillion rupees ($19.52 billion).

The segment "offers superior liquidity and aligns strategically with potential open market operations from the Reserve Bank of India," Iyer said.

Iyer's comments come amid a selloff in Indian government bonds, driven by concerns that higher oil prices impacted by the Iran conflict could stoke inflation and strain the fiscal outlook.

A 10-rupee per litre cut in fuel excise duties on Friday could cost about 1.55 trillion rupees annually, according to Emkay Global.

India's 10-year benchmark bond yield climbed to 6.95% on Friday, the highest in 20 months.

Iyer said the exposure to 30–40-year bonds was reduced in late 2025 as market technicals weakened and regulatory changes curbed demand from long-term investors.

After exiting long-duration positions six months ago, there is no immediate case to re-enter the ultra-long 30–40 year segment, she added.

Yields on 30-year and 40-year bonds have risen about 50 basis points since early October, while the 10-year is up about 35 basis points.

That shift helped shield the portfolio from widening spreads between the 10-year and ultra-long bonds.

The insurer is also moving down the duration curve in corporate bonds, favouring the five-year tenor over the 10-year, where limited supply and shallow market depth constrain execution, she added.

"Recent high-quality acquisitions have allowed us to build a good position for our carry portfolio. Under our base-case scenario of a prolonged RBI pause, five-year corporate bonds offer attractive yields and are particularly well-suited for a one-to-two-year roll down strategy."

($1 = 94.2400 Indian rupees)

Rise in India's ultra-long bond yields outpaced 10-year yield in FY26 https://reut.rs/47qSQ0o

 (Reporting by Dharamraj Dhutia; Editing by Nivedita Bhattacharjee)

 ((Dharamraj.Dhutia@thomsonreuters.com;))