Where are interest rates headed?
Taking off from the earlier post..I am not sure whether the interest rates have peaked. One look at the dynamic and income opportunity funds also proves what I say. Fund managers are also divided on whether interest rates have peaked. Frankly I do not care I do not have too much of a debt portfolio. Having PPF and SBI bonds (9.9% coupon) is not really of any use – after all in a dynamic world PPF is quite useless for action.
However the price of the SBI 15 year bond is 10,000 – but today i had an offer of Rs. 570 as a premium with the buyer willing to bear the sell side brokerage too. Of this I guess 1% must have come from the ‘brokerage’ got for mobilising. This means interest rates are headed up at least in the next 20-30 days? Not sure
The client being willing to pay a 5% premium is unthinkable – however if interest rates go up, this bond will be available at a discount. That will make it attractively priced…
One fund manager who runs a dynamic fund says – interest rates have peaked (no further increase possible), he says look for yield benefit and also play the duration game -as soon as interest rates start coming down take the moolah.
He feels FMP is fine, but a 1 year fund with a short term view is fine.
He feels you should stick to Income fund / dynamic opportunities funds…take your pick.