Yield-to-maturity of debt funds now similar across durations, shows data

Mismatch in YTM growth because shorter-end of yield curve more responsive to rate changes, say experts

Abhishek Kumar Mumbai

Debt mutual funds have seen continued outflows owing to the poor performance over the past year and the rate hike cycle

The yields being offered by debt funds are now similar across categories, with the yield-to-maturity (YTM) of shorter-horizon funds rising at a faster pace than medium-to-longer-horizon funds.  

In December, the YTM of overnight funds rose by 77 basis points (bps), while medium-to-longer-horizon funds like corporate bond and gilt saw YTMs rise by just 5-10 bps.
Experts said the mismatch was because the shorter-end of the yield curve was more responsive to interest rate changes than the medium-to-longer-end of the yield curve.
“The yields of short-term debt instruments are directly linked to the repo rate. That’s why they go up with every rate hike. The yields of medium-to-longer-duration are in some way market driven. Since, the market had already factored in future rate hikes some months back, there hasn’t been much movement in yields in the last few months,” said Rahul Jain, senior vice-president of

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First Published: Jan 19 2023 | 11:32 PM IST

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