Why Invest in Long Term Bond MFs

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 RBI Repo Rate at 6.5% is almost at an 8-year peak. Government of India 10-Year Bond Yield is currently at 6.85%. While long term bond yields have fallen from 7.5% (in June 2022) but yields are likely to fall further as RBI starts the rate cut cycle.

 While, RBI in its last Monetary Policy in December did not cut rates, it reduced CRR by 0.50%. Markets expect RBI to start cutting rates by early 2025. As a consequence current interest rates may not be available after sometime  

 The only way to lock-in high interest rates is to invest in Bond Funds that have high Duration. Investors can simultaneously lock-in high long-term yields and potential gain from any future fall in yields. 

• Open ended Debt scheme 
• AUM of 5,400 crores. 
• Invests in only Government of India Bonds of long duration such that the Macaulay Duration of the portfolio is greater than 7 years.
• A Relatively High Interest Rate Risk and Relatively Low Credit Risk 

• Last 1 Year Return is in excess of 13% p.a.*

*Returns are subject to market movements 

https://www.hdfcfund.com/product-solutions/overview/hdfc-long-duration-debt-fund/regular

• Residual Maturity - 29.48 yrs 
• Macaulay Duration** - 12.30 yrs 

**Source - HDFC Mutual Fund Fund Facts as of 31Oct 2024