Anushka Trivedi
Mumbai, 25 November (Reuters) – Avnish Jain, head of fixed income at Kanara Robeco Asset Management Company, said the highest-rated one-year corporate bonds are currently attractive because they are relatively safe and offer yields roughly in line with government bonds. said to be an investment destination.
Yields on 1-year AAA corporate bonds INAAAPSU1Y=IMMU was 7.48%, while its sovereign counterpart was IN1YT=RR It was 6.78%.On the other hand, the 10-year benchmark bond IN072632G=CC The yield was 7.25%.
“Right now, we’re focusing more on 1-year bonds because we’ve found yields between 7.50% and 7.60% to be good. If yields are similar across the yield curve, go for longer duration bonds. It makes little sense,” Jain said. .
As for government bonds, Jain said he prefers 5-, 6- and 7-year bonds because the yields are roughly comparable to benchmark bonds.
Demand for 10-year bonds, especially by long-term investors, remained strong, although spreads between high-quality corporate bonds and government bonds of the same maturity have narrowed this year as corporate borrowing has fallen, Mr. Jain said.
Currently, the 10-year Treasury yield and similar maturity corporate bond spreads are around 25 basis points.
Issuance is up and public sector banks are expecting more issuance towards the end of the year, but as institutions such as pension funds and insurance companies continue to pile up these bonds and squeeze yields. He doesn’t think spreads will widen much.
On the other hand, tighter liquidity could also squeeze spreads, he added.
The next big trigger will be the 2024 budget announcement in February, when the government’s total borrowing will be released, but until then the market could stay in the current range, Jain said.
“Barring any major surprises on the monetary policy side, the benchmark 10-year yield at the end of the fiscal year would be about the same, between 7.20% and 30%,” he said.
Jain said that while future rate hikes by the US Federal Reserve and Reserve Bank of India are largely priced in, investors remain very cautious about data points such as inflation.
Therefore, Canara Robeco’s debt scheme, which is currently seeing inflows, is mostly short-term liquid funds such as 30 days, he said.
“Investors are wary of rate hikes and may be trying to time the market, so they may be focusing on short-term funds such as liquid, ultra-short and short-term products. there is.”
(Reporting by Anushka Trivedi, Mumbai; Editing by Maju Samuel)
((anushka.trivedi@thomsonreuters.com; Reuters message: anushka.trivedi.thomsonreuters.com@reuters.net/Twitter: @anushkat96))
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