Global capital markets, particularly debt markets, have seen a sharp turnaround in recent days due to the recent failures of Silicon Valley Bank (SVB) and Signature Bank in the United States and fear of a risk of contagion spreading through the financial sector.
Global capital markets, particularly debt markets, have seen a sharp turnaround in recent days due to the recent failures of Silicon Valley Bank (SVB) and Signature Bank in the United States and fear of a risk of contagion spreading through the financial sector.
The focus of the US Federal Reserve may shift to financial stability and may now take precedence over high inflation. Markets in debt markets have turned optimistic that the US Fed will suspend or cut rates sooner than expected.
The focus of the US Federal Reserve may shift to financial stability and may now take precedence over high inflation. Markets in debt markets have turned optimistic that the US Fed will suspend or cut rates sooner than expected.
Debt markets in India and around the world have been under pressure for the past two years, with central bankers raising interest rates to fight record inflation.
Debt markets in India and around the world have been under pressure for the past two years, with central bankers raising interest rates to fight record inflation.
The debt market, an attractive investment option
However, as we near the end of the rate hike cycle and yields rise significantly, the debt market has become an attractive investment option, analysts at the brokerage and research firm said. ICICI Direct.
The debt market, an attractive investment option
However, as we near the end of the rate hike cycle and yields rise significantly, the debt market has become an attractive investment option, analysts at the brokerage and research firm said. ICICI Direct.
“Indian debt markets have become attractive after the continuous rise in yields over the past few years. Mutual fund yields have increased and offer excellent investment opportunities,” the brokerage said.
“Indian debt markets have become attractive after the continuous rise in yields over the past few years. Mutual fund yields have increased and offer excellent investment opportunities,” the brokerage said.
In India, the rate hike cycle is coming to an end with expectations of a final 25 basis point rate hike in April 2023. Since a higher yield in the debt market is realized when the investments are made near the top of the rate cycle, the year 2023 could mark the comeback year for debt markets in India as well as globally.
In India, the rate hike cycle is coming to an end with expectations of a final 25 basis point rate hike in April 2023. Since a higher yield in the debt market is realized when the investments are made near the top of the rate cycle, the year 2023 could mark the comeback year for debt markets in India as well as globally.
Investment opportunity
The brokerage believes that investors should consider a lump sum investment opportunity. Regularization funds and duration funds offer investment opportunities.
Investment opportunity
The brokerage believes that investors should consider a lump sum investment opportunity. Regularization funds and duration funds offer investment opportunities.
“Aggressive investors may consider allocating a higher amount to dynamic mutual funds or long-term funds, while conservative and moderate investors may invest by allocating a higher amount to medium-term/ corporate bond fund,” the note read.
“Aggressive investors may consider allocating a higher amount to dynamic mutual funds or long-term funds, while conservative and moderate investors may invest by allocating a higher amount to medium-term/ corporate bond fund,” the note read.
“A longer dated product will help lock in coupons or interest rates and protect against the interest rate cycle. Longer dated government securities (20-25 years) offering a yield of around 7.6% is also a good long-term investment option for fixed income offering higher accumulation while also removing reinvestment risk,” he said.
“A longer dated product will help lock in coupons or interest rates and protect against the interest rate cycle. Longer dated government securities (20-25 years) offering a yield of around 7.6% is also a good long-term investment option for fixed income offering higher accumulation while also removing reinvestment risk,” he said.
Rate hike cycle peaked in India
The RBI in the current rate hike cycle raised repo rates by 250 basis points between May 2022 and February 2023, from 4.0% to 6.5%. With CPI for FY23-24 projected at 5.3%, the Repo rate at 6.5% offers a real rate of 1.20% which falls within the RBI’s target range of 1% to 2%.
Rate hike cycle peaked in India
The RBI in the current rate hike cycle raised repo rates by 250 basis points between May 2022 and February 2023, from 4.0% to 6.5%. With CPI for FY23-24 projected at 5.3%, the Repo rate at 6.5% offers a real rate of 1.20% which falls within the RBI’s target range of 1% to 2%.
However, until recently, as the global central bankers, especially the US Federal Reserve, continued their hawkish stance, the Indian debt market also started pricing in another rate hike by the RBI in its policy to April 2023 at 6.75%.
However, until recently, as the global central bankers, especially the US Federal Reserve, continued their hawkish stance, the Indian debt market also started pricing in another rate hike by the RBI in its policy to April 2023 at 6.75%.
However, in recent days yields, particularly in the US, have fallen significantly, with the 2-year yield down 50 basis points from 4.4% to 3.9%, while the 10-year fell more than 25 basis points to less than 3.5% from 3.7%.
However, in recent days yields, particularly in the US, have fallen significantly, with the 2-year yield down 50 basis points from 4.4% to 3.9%, while the 10-year yield fell more than 25 basis points to less than 3.5% from 3.7%.
The US Federal Reserve is now expected to cut rates by 100 basis points in calendar year 2023 after a likely final rate hike of 25 basis points at its policy meeting on March 22, 2023.
The US Federal Reserve is now expected to cut rates by 100 basis points in calendar year 2023 after a likely final rate hike of 25 basis points at its policy meeting on March 22, 2023.
Falling commodity prices, particularly crude oil prices, also improved the outlook for inflation. Therefore, the brokerage believes that RBI will maintain the status quo on the Repo benchmark rate at its next policy meeting and for the foreseeable future. The terminal repo rate is therefore probably at the current rate of 6.5% in the short term.
Falling commodity prices, particularly crude oil prices, also improved the outlook for inflation. Therefore, the brokerage believes that RBI will maintain the status quo on the Repo benchmark rate at its next policy meeting and for the foreseeable future. The terminal repo rate is therefore probably at the current rate of 6.5% in the short term.
The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.
The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.
