MUMBAI: Mirae Asset Investment Managers (India), one of the country’s largest mutual funds by assets under management, is finding five-year government debt attractive, a fixed income fund manager at the firm said.
“Structurally, we like the 5-year part of the curve along with tactical calls in the longer end,” Basant Bafna, head – fixed income at Mirae Asset, told the Reuters Trading India forum on Friday.
The fund house manages around 300 billion rupees ($3.33 billion) of debt assets as on November.
India issued a new five-year bond earlier in the day at a cutoff yield of 6.36%, while the prevailing five-year benchmark bond yield traded around 6.32%.
The 10-year benchmark bond yield was at 6.68%, pushing the spread between the two assets to over 30 basis points, while the spread over the Reserve Bank of India policy rate is more than 110 bps, at levels last seen over three years ago.
“Over the past week, money markets have witnessed partial transmission,” of the Reserve Bank of India’s rate cuts, Bafna said.
Indian overnight rates have crumbled over the last few days, with the weighted average interbank call money rate averaging around the floor of the monetary policy corridor and the weighted average tri-party repo rate plunging further than that.
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The RBI’s repo rate remains at 5.25% after the central bank kept it unchanged at last week’s policy, while the Standing Deposit Facility rate is at 5.00%.
Bafna also said the lack of a formal switch announcement in the government’s budget on February 1 did not surprise markets, as investors had already factored in the likelihood that such operations would take place later in the year.
The focus remains on next financial year’s supply, according to Bafna, who expects the bulk of issuance to be concentrated in the belly of the yield curve, meaning predominantly government bonds with maturity between 7- and 14-years.
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