IDFC Mutual fund goes overweight in higher duration as a tactical move

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IDFC Mutual Fund is buying into the 9-14 year government bonds segment in its actively managed duration funds. The fund house says it is their tactical move as the steepness of the 9-14 year segment as compared to the 6-8 years segment remains intact. “This change from our “stickier” preferred stance of 6 – 8 year bonds is basis a few tactical considerations. Despite an increasing in issuance in the 3 – 5 year segment under the revised borrowing calendar and with RBI stepping up OMO purchases, the steepness of the 9 – 14 year segment to 6 – 8 year had been largely intact,” says Suyash Choudhary, head-fixed income, IDFC Mutual Fund.

RBI, in its monetary policy, last month, announced twice the amount of the OMOs of 20,000 crore, first time OMOs of state development loans and On Tap TLTROs amongst the major announcements to bring cheer to the bond markets.

“Had the market already flattened the curve readily then it is likely that we would have not executed the shift basis valuation considerations. Also, we are intrigued by the references to long term yields in the minutes of the recent policy,” says Suyash Choudhary.

The fund manager added that the fund house reserves the right to modify their stance at any time given the active duration mandates of these funds.

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