Stories
High Bond Yields Present Attractive Entry Point For Debt Investors
- •Manish Banthia of ICICI Prudential AMC states that high bond yields create an attractive entry point for debt mutual fund investors.
- •Corporate bond yields have risen significantly, with two-year to five-year bonds reaching their highest levels in five years.
- •Investors are advised to focus on current yields and financial goals rather than chasing past returns or market sentiment.
- •Choice of debt fund should depend on investment horizon, with short-term options like liquid funds and medium-term flexible strategies recommended.
Key Questions Answered
According to Manish Banthia, CIO of Fixed Income at ICICI Prudential AMC, high bond yields create an attractive entry point because expectations of further interest rate hikes are already reflected in prices. Higher yields ideally mean higher potential returns, making corporate bonds look positive for medium-term investments.
Banthia noted that yields on two-year to five-year corporate bonds are at their highest levels in five years. This makes the short- to medium-term segment particularly attractive for investors looking to park money without waiting for the RBI to complete its rate hike cycle.
Investors should choose debt funds based on their specific financial goals and investment horizons. Overnight, liquid, and ultra-short-duration funds suit shorter periods, while medium-term investors should favor flexible strategies that adjust portfolio duration. Additionally, investors must assess the credit quality of underlying bonds, as higher yields can carry greater credit risk.
