Fund houses line up fixed maturity plans as bond yields continue to rise

The hardening of bond yields has spurred launches of fixed-maturity plans (FMPs) — fixed-tenure mutual fund (MF) schemes that invest in debt securities with matching tenure of the scheme.

The yield on the 10-year government security on Friday ended at 7.42 per cent. In the past six months, the yield on 10- year G-Sec has risen by nearly 100 basis points.

Kotak MF and Union MF, in recent weeks, have filed offer documents with the Securities and Exchange Board of India (Sebi) to launch FMPs. According to industry players, more fund houses can follow suit.

G Pradeepkumar, chief executive officer, Union Asset Management