Yields are heading towards the right most bands. The 10 year benchmark yield is close to about 7.85%, and the old or the erstwhile benchmark is trading above the 8% region. The rest of the yield curve on the sovereign side is anywhere in the range of 8.1 to 8.5%.
"We believe that these are extremely opportunistic buys to give exposure on the duration fund. To that extent we remain constructive on the bond and the guilt story and would recommend investors to stay put in duration funds or possibly increase allocation at the current levels,'' said Lakshmi Iyer, chief investment officer (Debt) and head products, Kotak Mutual Fund.
Iyer further expects the Reserve Bank to ease rates probably by another 25 basis points, before the end of financial year 2016 and probably for the remainder of calendar year 2016 maybe another 50 basis points. But that would largely be contingent on the way inflation pans out.
''We do not expect monsoon to play significant havoc on inflation at the current juncture, largely because all of the past history of the current government being able to manage the food side supply, if there to be a below deficit/normal monsoons,'' Lakshmi Iyer added.
''The outlook for interest rates continue to remain favourable. The shorter end of the yield curve is also reasonably well supported because of the fact that there is reasonably comfortable liquidity in the system. We expect this scenario to continue into the near future as well. The month of June also saw advance tax outflows, which did not dent the shorter end of the yield curve, indicating our stance that the current yield curve remains attractive as also supportive,'' Iyer concluded.
