Our advice to investors is to look beyond the volatility and stay invested in low to moderate duration funds, says Parijat Agrawal, Head – Fixed Income, Union Asset Management Company in this exclusive interview
In a context of rising inflation, what kind of impact do you see on bond markets and the yield curve over the next few quarters?
Rising inflation has a negative impact on the bond market, pushing yields and bond values down. The yield curve should remain steep as will market prices in the risk premium.
How are you positioning your debt fund portfolios in the current market scenario?
Ongoing supply-side disruptions, rising margins and global spillovers kept pricing pressures up. Market risk surged as Russia invaded Ukraine, keeping commodity prices firm. A growing number of central banks have started to normalize their monetary stance, albeit at a different pace.
In light of the above, we expect the rate environment to remain under pressure with high term spreads, accompanied by volatility due to a large market, systemic and geopolitical risks and supply. abundant for a considerable period in the future.
We will remain defensive in our positioning and seek opportunities in the high quality credit space.
What advice would you give to a regular income seeker with a low appetite for risk who wants to rely on mutual funds to get decent returns? What type of fund would suit such an investor?
Our advice to investors is to look beyond volatility and stay invested in low to moderate duration funds, as the higher interest accrual will significantly cushion the negative impact of volatility.
What do you think of the EU budget 2022? How’s that for long-term debt markets?
The Union budget for 2022 is expansionary and the budget deficit target of 6.4% was above market expectations. Oversupply concerns will keep the curve under pressure.