US bond yields have been rising on the back of huge AI infrastructure capex spends – which is not only bringing global capital into the US (and thus strengthening USD) but also keeping bond yields well bid due to demand surge for capital.
Debraj expects that recent commentary casting some doubts on efficacy of these capex spends may cap demand and therefore allow US bond yields to pause into a range. He does not therefore expect US bond yields to continue marching upwards.
RBI has signaled that it will not go in for a rate hike unless it sees broadbasing of inflation. Recent steps taken of FII bond investments taxation and FCNR-B NRI deposits will also support Indian currency and money markets. Debraj sees Indian bond yields trading in a range – doesn’t expect directional moves either way.
He likes 2-4 yr corporate bonds and in G-Secs, long bonds in the 14 yr and above buckets.
Debraj puts a spotlight on the Bandhan Floater Fund – a uniquely positioned fund from their fixed income suite – which he believes can serve investors very well.
It is among the most flexible funds within their fixed income suite – it has wide latitude for asset allocation across corporate and government bonds and also a fair degree of latitude within corporate bonds as well.
Within corporate bonds, it invests not only in AAA bonds but also selectively into AA and AA- bonds, and has flexibility to determine the allocation between rating bands based on where the credit cycle is.
Today, this fund is capturing all the interesting opportunities the fund house sees in fixed income markets: AAA bonds in the 2-4 year maturity bucket, selective bets in AA and AA- bonds and at the other end of the spectrum, 14 yr maturity G-Secs as well. Active use of interest rate swaps enables the fund to deliver on the “floater” aspect.
In a sense, the Bandhan Floater Fund seems to be a “best ideas” fund from the well respected fixed income team of this fund house, with ample flexibility to allow the manager to express their views into portfolio action within a single fund.