It's time for investors to lock in attractive bond yields

With rate cycles nearing peak, experts believe that the debt market has become an attractive investment option for retail investors

- SACHIN KUMAR

THE collapse of Silicon Valley Bank and Signature Bank in the US; and the crisis in Credit Suisse have not only spooked the equity markets but have also dented the yields in the debt market.

Despite the recent fall in yields due to global developments, experts are betting on the debt market.

Analysts believe that as we are close to the end of the rate hike cycle and due to a significant rise in the yields over the past months, the debt market has become an attractive investment option for retail investors.

Rate cycle close to its peak

With easing of inflation, decline in crude oil prices and weaker growth, analysts are not expecting much increase in interest rates in coming months. Experts agree that the interest rate cycle will peak out in the next few months.

"Debt mutual funds have become more attractive with the rise in yields as investors can gain from higher coupons and lesser mark-to-market impacts on portfolios as interest rates may be reasonably close to peaking out. For investors who are in higher tax brackets, debt funds continue to be very attractive due to indexation benefits if they are held for more than 3 years," Vishal Dhawan, Vice Chairman, Association of Registered Investment Advisors told TNIE.

The Reserve Bank of India (RBI) in the current rate hike cycle has raised repo rates by 250 bps since May 2022 till February 2023 from 4% to 6.5%.