G-sec yield spike hurts long duration debt MFs, opportunity in sight

Long duration debt mutual funds (MFs) have borne the brunt of the surge in government securities (g-sec) yields in recent months.

- ABHISHEK KUMAR

Investors in dynamic bond and g-sec funds with greater exposure to longer-maturity papers have also seen a sharp erosion in near-term returns.

The average return of long-duration funds has fallen to 3.7 per cent over the past year, according to Value Research. The figure stood at 7.6 per cent at the start of August 2025 and nearly 11 per cent at the start of the year, data from the Association of Mutual Funds in India (Amfi) shows.

After declining steadily since March 2023, g-sec yields have reversed course in the past month.

Yields on 15-year and 30-year papers jumped about 30 basis points in August, hitting their highest levels this year. The 30-year g-sec yield stood at 7.3 per cent on Monday, up from a recent low of 6.76 per cent in April 2025.