Debt markets shine in a murkier global growth outlook:
On a point-to-point basis, the benchmark 10-year yield on government bonds fell by 24bps from 7.61% to 7.37%. Conversely, the spread on 10-year AAA and AA corporate bonds widened by 19 bps from 98 bps to 117bps and by 24 bps from 155 bps to 179bps respectively. This resulted in gains in NAV at 0.92% in rupee terms.
A 0.17% Indian rupee depreciation versus the US dollar capped the NAV gain of US dollar 0.75%. Year to date, the Fund’s NAV is +4.02% in INR terms and - 4.90% in US dollar terms, when adjusted for the 8.58% Indian rupee depreciation. The cash level in the Fund has gone up to 11.1% on the redemption of bonds by IDFC Bank and Indian Railways Finance Corporation (3.4% of the fund AUM each).
The Fund Managers are constructive on debt markets in 2019;
Deliberating between duration strategy versus credit spreads, the Fund bought one lot of long duration G-Secs with 2035 maturity in December. The Fund is continuing its credit research and will use this cash as and when it finds appropriate opportunities.
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