interest rate environment.
Experts believe that fund houses had become a bit over-confident in taking duration calls. For instance, on May 23, Birla Sun Life MF released a report titled 'Bond 007', making a case for yields of the
10-year government securities to breach the 7% levels by the end of the current rate cycle.
Similarly, HDFC MF had put up hoardings across Mumbai with the tagline “Debt Mutual Funds help achieve your financial goals” as part of its investor education and awareness initiative.
Last Friday, absolute one-day returns of long duration bond funds declined anywhere between 1.5-2.5% as yields on benchmark 10-year bonds rose 36 basis points to 8.559% over the previous day.
This is perhaps the second biggest jolt to the return of long duration bond funds in the last three months. On July 16, returns of some income and gilt medium-&-long-term debt funds had declined 3-4% following RBI’s liquidity tightening measures.