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Economic Times
7 days ago
- Business
- Economic Times
Corporate bond curve in 3–6-year segment offers investment opportunity amid rate cut hopes: PGIM India MF
Investment Strategy: Short-term and dynamic bond funds Live Events Indian debt market update International markets (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel The 3–6-year segment of the corporate bond curve presents a favorable investment opportunity in the current interest rate environment, according to Puneet Pal, Head of Fixed Income at PGIM India Mutual the Reserve Bank of India maintaining an accommodative stance to support economic growth, the focus remains on ensuring effective transmission of policy rate cuts and keeping banking liquidity at comfortable India Mutual Fund expects average CPI inflation for FY26 to be approximately 50 basis points lower than the RBI's projection, increasing the likelihood of further rate cuts. 'Given these conditions, the 3–6-year corporate bond curve, particularly AAA-rated PSU bonds, looks attractive. The current spread of 60–70 basis points between 5-year PSU bonds and equivalent government securities is appealing, especially when banking system liquidity remains in surplus,' said addition to the 3–6-year corporate bond space, PGIM India MF sees a tactical opportunity at the longer end of the yield curve. 'Yields on 30-year bonds have remained unchanged over the past year, creating potential for value buying,' Pal are advised to continue allocating to short-term or corporate bond funds with portfolio maturities of up to six years, while remaining tactical with duration via dynamic bond funds PGIM India recommends an investment horizon of 12–18 months. Money market instruments with up to one-year maturities also offer attractive risk-reward profiles, the fund house ahead, PGIM India expects the 10-year benchmark bond yield to remain in the range of 6.10% to 6.50% over the next yields trended lower through July, driven by better-than-expected inflation data. The 10-year bond yield closed at 6.36% on July 18, down 2.5 basis points since the start of the month, while the long-duration segment outperformed as 30-year and 40-year bond yields fell by 10 basis June CPI inflation came in at 2.10%, below market expectations of 2.25%, driven largely by falling food prices. Core inflation (excluding food, beverages, and fuel) rose slightly to 4.4%. PGIM India expects FY26 CPI inflation to average around 3%, well below the RBI's 3.7% forecast, raising the probability of another 25 basis points policy rate cut by December inflation declined to -0.13%, marking the lowest level since October 2023. Meanwhile, India's goods trade deficit narrowed to USD 18.8 billion in June, supported by a sharp decline in oil and gold imports. The services trade surplus remained steady at USD 15.3 conditions have also been supportive. Cumulative rainfall stood 12% above the long-term average as of mid-July, leading to higher sowing across key Kharif crops like rice, pulses, coarse cereals, and bond yields continued to remain elevated as debt concerns dominated the narrative, along with the continued strength of the US US benchmark 10-year bond yield ended the week at 4.42%, 19 basis points higher than the month's starting level of 4.23%.Long-end Japanese bond yields also rose, with the 30-year bond yield touching a high of 3.15%. Chinese CPI turned positive after five months, rising 0.1% year-on-year.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Time of India
7 days ago
- Business
- Time of India
Corporate bond curve in 3–6-year segment offers investment opportunity amid rate cut hopes: PGIM India MF
The 3–6-year segment of the corporate bond curve presents a favorable investment opportunity in the current interest rate environment, according to Puneet Pal, Head of Fixed Income at PGIM India Mutual Fund. With the Reserve Bank of India maintaining an accommodative stance to support economic growth, the focus remains on ensuring effective transmission of policy rate cuts and keeping banking liquidity at comfortable levels. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like War Thunder - Register now for free and play against over 75 Million real Players War Thunder Play Now Undo PGIM India Mutual Fund expects average CPI inflation for FY26 to be approximately 50 basis points lower than the RBI's projection, increasing the likelihood of further rate cuts. 'Given these conditions, the 3–6-year corporate bond curve, particularly AAA-rated PSU bonds, looks attractive. The current spread of 60–70 basis points between 5-year PSU bonds and equivalent government securities is appealing, especially when banking system liquidity remains in surplus,' said Pal. In addition to the 3–6-year corporate bond space, PGIM India MF sees a tactical opportunity at the longer end of the yield curve. 'Yields on 30-year bonds have remained unchanged over the past year, creating potential for value buying,' Pal noted. Investment Strategy: Short-term and dynamic bond funds Investors are advised to continue allocating to short-term or corporate bond funds with portfolio maturities of up to six years, while remaining tactical with duration via dynamic bond funds . Live Events PGIM India recommends an investment horizon of 12–18 months. Money market instruments with up to one-year maturities also offer attractive risk-reward profiles, the fund house said. Looking ahead, PGIM India expects the 10-year benchmark bond yield to remain in the range of 6.10% to 6.50% over the next month. Indian debt market update Bond yields trended lower through July, driven by better-than-expected inflation data. The 10-year bond yield closed at 6.36% on July 18, down 2.5 basis points since the start of the month, while the long-duration segment outperformed as 30-year and 40-year bond yields fell by 10 basis points. India's June CPI inflation came in at 2.10%, below market expectations of 2.25%, driven largely by falling food prices. Core inflation (excluding food, beverages, and fuel) rose slightly to 4.4%. PGIM India expects FY26 CPI inflation to average around 3%, well below the RBI's 3.7% forecast, raising the probability of another 25 basis points policy rate cut by December 2025. WPI inflation declined to -0.13%, marking the lowest level since October 2023. Meanwhile, India's goods trade deficit narrowed to USD 18.8 billion in June, supported by a sharp decline in oil and gold imports. The services trade surplus remained steady at USD 15.3 billion. Monsoon conditions have also been supportive. Cumulative rainfall stood 12% above the long-term average as of mid-July, leading to higher sowing across key Kharif crops like rice, pulses, coarse cereals, and oilseeds. International markets Globally, bond yields continued to remain elevated as debt concerns dominated the narrative, along with the continued strength of the US economy. The US benchmark 10-year bond yield ended the week at 4.42%, 19 basis points higher than the month's starting level of 4.23%. Long-end Japanese bond yields also rose, with the 30-year bond yield touching a high of 3.15%. Chinese CPI turned positive after five months, rising 0.1% year-on-year.
Business Recorder
22-07-2025
- Business
- Business Recorder
India bonds end steady as traders await cues on policy rates
MUMBAI: Indian government bonds were stuck in a limbo on Tuesday, as traders slowed activity, awaiting clarity on the central bank's rate cut trajectory, and as banking liquidity remained tight. The yield on the benchmark 10-year bond ended at 6.3069%, compared with Monday's close of 6.2996%. Bond yields move inversely to prices. India's banking system liquidity surplus narrowed to a seven-week low on Monday due to tax outflows. The surplus dropped to 2.4 trillion rupees ($27.83 billion), the lowest since June 1, from 3.04 trillion rupees in the previous session. 'Bonds are expected to remain rangebound till the Reserve Bank's policy decision in August,' a trader at a private bank said. Key triggers to watch for would be the Federal Reserve's policy decision due this month as well as demand for New Delhi's debt sale on Friday, traders said. Some investors are betting on another rate cut in India since the June inflation reading showed that prices rose in the slowest pace in 6 years. India bonds advance as traders build positions for another rate cut 'The latest CPI print reinforces the benign trajectory driven by moderating food prices as well as benign commodity prices. This increases the probability of incremental rate cuts, and we expect one more policy rate cut of 25 bps by December,' said Puneet Pal, head of fixed income at PGIM India Mutual Fund. Over the last one month, foreign investors have net bought 129 billion rupees of Indian bonds linked to global indexes after selling more than 330 billion rupees in the first two-and-a-half months of the financial year that started on April 1, clearing house data showed. Rates Traders likely reversed receive positions in India's 1-year overnight index swap rate, while long-term rates remained rangebound. The one-year OIS rate rose over 1 basis point to 5.50%, while the two-year OIS rate was little changed at 5.46%. The liquid five-year OIS remained flat at 5.68%.
Time of India
07-07-2025
- Business
- Time of India
Stable Indian government bond yields push investors towards more attractive corporate debt
Indian mutual funds and insurance companies are shifting towards an accrual strategy to capitalise on higher corporate bond yields , as government bond yields are expected to remain largely stable, investors told Reuters on Wednesday. An accrual strategy focuses on earning returns primarily through interest payments, rather than through trading or capital gains. Fund managers are increasingly favouring shorter-duration bonds when yields are near the upper end of the range. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Villas For Sale in Dubai Might Surprise You Dubai villas | search ads Get Deals Undo The LSEG benchmark AAA-rated two-year and three-year corporate bond yields stood at 6.56% and 6.70%, respectively, on Monday. Bonds Corner Powered By Stable Indian government bond yields push investors towards more attractive corporate debt Indian mutual funds and insurance firms are increasingly adopting an accrual strategy, drawn by higher corporate bond yields amidst stable government bond yields. Mutual funds favor shorter-duration bonds, while insurance companies show interest in longer-duration bonds, specifically the five-year to 10-year part of the curve. Rupee bond binge by Indian firms poised to slow after record run Bond market awakening in 2025: India catching up with global capital flows India bond traders eye US data, RBI liquidity operation for cues ETMarkets Smart Talk - FPI outflows from Indian bonds likely tactical profit booking, says Puneet Pal of PGIM India AMC Browse all Bonds News with The spread between corporate and government bond yields in these two tenors has risen around 20-30 basis points over the past month to 85 bps. "As long as there is no danger of policy reversing, the two-three-year bonds will respond to local liquidity ... so, we have already reallocated funds from the long bonds to the 2-3-year corporate bonds," said Sandeep Bagla, CEO at Trust Mutual Fund, which manages overall assets worth around 35 billion rupees ($408.00 million). Live Events The uptick in corporate bond yields has surpassed gains in government bonds since the Reserve Bank of India shifted its monetary policy stance and began withdrawing liquidity from the banking system. "In the context of present market conditions and macro-economic environment, we are cutting duration... I am positive on the shorter end as liquidity is likely to flow there," said Killol Pandya, senior fund manager for debt at JM Financial Asset Management, which manages debt assets worth about 38 billion rupees. "We have scaled back duration in our dynamic bond fund too," he said, noting that the company had gone from an exclusively government bond approach to strategically moving some funds to corporate bonds, towards the accrual system. While mutual funds are concentrating on the shorter end of the corporate bond yield curve, insurance companies are showing interest in longer-duration bonds. "We believe currently the most attractive part of the market is corporate bonds, especially the five-year to 10-year part of the curve," said Rahul Bhuskute, CIO at Bharti AXA Life Insurance. The spread between five-year and 10-year corporate bond yields and government bond yields remains in the range of 75-85 bps. ($1 = 85.7850 Indian rupees)
Economic Times
03-07-2025
- Business
- Economic Times
ETMarkets Smart Talk - FPI outflows from Indian bonds likely tactical profit booking, says Puneet Pal of PGIM India AMC
Agencies This could very well be a case of profit-taking, and also the fact that the US-India interest rate differential has narrowed, leading to some capital reallocation. In this edition of ETMarkets Smart Talk, Puneet Pal, Head of Fixed Income at PGIM India AMC, addresses the recent $2 billion FPI outflows from Indian fixed income markets in June. Despite strong macroeconomic fundamentals and steady returns from Indian bonds over the past two years, foreign investors have begun paring their exposure. Pal believes this trend is largely driven by tactical profit booking and narrowing interest rate differentials between India and the US, rather than any structural concern. He explains why India's bond market remains fundamentally strong and why these outflows shouldn't raise red flags for investors. Edited Excerpts – Kshitij Anand: Let us start with the corporate bond segment. Why is the three- to six-year corporate bond segment seen as an attractive investment opportunity right now? Puneet Pal: We see the three- to six-year AAA PSU segment as an attractive opportunity simply because we foresee that there will not be any rate cuts over the next six months, at least until December. The RBI has indicated that there is limited room for monetary policy to support growth going forward, and they changed the monetary policy stance to neutral from accommodative in the June 6 policy. This makes us believe that there will be a status quo on policy rates, limiting the duration play in terms of overall returns from a fixed income perspective. This makes accrual an attractive opportunity. When we talk about AAA spreads, they are currently around 60 to 70 basis points over corresponding maturity G-Secs, which I would say is a pretty decent or attractive spread. Historically, in a rate-cutting cycle followed by abundant liquidity in the banking system, we have seen the spreads compressing to around 40 basis there is still some scope for the spreads to come down, which can lead to better returns. That is why we see this three- to six-year segment in the AAA PSU space as a better risk-adjusted investment opportunity. Click Here for Livestream - Why FPIs Are Selling Indian Bonds Kshitij Anand: You did mention that the RBI is probably not cutting rates anytime soon, but are there any other reasons why the current spread between AAA PSU bonds and G-Secs is historically attractive? Puneet Pal: Yes, because the RBI has committed to maintaining adequate and surplus liquidity to the tune of 1% of the means that liquidity in the overall banking system should be in excess of ₹2.5 lakh crore, which is a trigger for the spreads to come down over a period of time, as money will follow higher that AAA PSUs in the five-year space are trading anywhere between 6.75% to 6.85%, and the corresponding G-Sec yields of the same maturity are around 6.10% to 6.15%, it makes sense that one can enjoy a higher accrual as the rate cuts take a the high accrual will lead to higher returns, and if there is spread compression — which we do expect over the next two quarters — that will add to the higher accrual. Kshitij Anand: You talked about the liquidity the RBI is going to maintain, but how does the RBI's stance on liquidity and rate transmission influence short-term bond investment strategies? Puneet Pal: We have already seen banks reducing their loan rates as well as deposit rates, so rate transmission is happening. It is crucial for the RBI to maintain this excess liquidity for rate transmission to continue, which is why the RBI is committing to maintaining surplus liquidity in the banking we look at the durable system liquidity, which includes government balances, it is currently in excess of ₹5.5 lakh and when government spending picks up, we are likely to see more liquidity flowing into the system, which means that rate transmission through banking channels will gain further momentum. Kshitij Anand: Now, in case someone is interested in investing right now, what kind of investment horizon would you recommend for those looking to allocate to short-term or corporate bond funds at this point in time? Puneet Pal: We would definitely advocate that anyone investing right now should do so with a minimum horizon of 12 to 18 months. That is the bare minimum one should keep in mind when investing in short-term or corporate bond we talk about better accruals or spread compression, one needs to stay invested for at least 12 to 18 months to fully benefit from that. So, I would recommend a 12- to 18-month investment horizon for short-term or corporate bond funds. Kshitij Anand: Let me also get your perspective on what's happening on the international front. How have global central banks—like the US Fed or the Bank of Japan—responded to the recent geopolitical uncertainty? We've seen the US Fed holding off on rate cuts while the BOJ has slightly raised interest rates recently. How are you interpreting all of this? Puneet Pal: That's a very pertinent question, and it's going to remain relevant for the foreseeable future. I would say that every central bank is primarily reacting to its domestic inflation and growth example, in India, the RBI has emphasized that its monetary policy decisions are mostly driven by domestic factors—specifically, the growth-inflation is also true for other central banks, like the US Fed and the BOJ. In Japan, inflation has risen after a long time, and their withdrawal of accommodation—through rate hikes or reduced bond purchases—is a response to that higher in the US, we are seeing relatively strong economic growth, and inflation is not yet coming down to the Fed's target. This is why the Fed has not cut rates in the current calendar year, although they did cut rates last are waiting for more subdued inflation before embarking on another rate-cutting cycle. While the Fed is projecting more rate cuts ahead, we will have to wait and see how the growth-inflation dynamics evolve in developed to directly answer your question: every central bank is focused primarily on its domestic growth and inflation dynamics. While they are also monitoring geopolitical developments, those tend to take a foremost consideration in their monetary policy decisions is domestic demand and inflation trends. Kshitij Anand: Let us also get your viewpoint on what FPIs or FIIs are doing at this point in time. In fact, we are seeing FPIs continuing to sell Indian fixed income assets despite improved macro indicators. Could you shed some light on what's happening right now and how you are interpreting this trend? FPIs continued to sell Indian fixed income with more than US$2 bn of outflows in June. Puneet Pal: We have seen a decent amount of inflows in 2023 and 2024. In both these years, there have been significant inflows into fixed income from we talk about the last quarter, from April to June, we have seen some outflows. This could be a result of profit booking—taking some profits off the table—because we have witnessed decent returns from Indian fixed income assets over the past two instance, the 10-year benchmark yield has come down from a high of around 7.60% in 2022 to a low of around 6.25% just a fortnight ago. So, FPIs who have invested over the last two years have seen good returns on their portfolio could very well be a case of profit-taking, and also the fact that the US-India interest rate differential has narrowed, leading to some capital we believe it's more about profit booking rather than anything fundamentally concerning. As you rightly pointed out, our macro indicators continue to remain strong and stable. Going forward, we expect this stability to from a macroeconomic standpoint, India is in a sweet spot, and there's no reason for concern. It appears to be more of a tactical reallocation after a strong rally in Indian bonds over the last two years. Kshitij Anand: So, no red flags there for the Indian market? Puneet Pal: Yes. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
