Yield-to-maturity of debt funds now similar across durations, shows data

Mismatch in YTM growth because shorter-end of yield curve more responsive to rate changes, say experts

The yields being offered by debt funds are now similar across categories, with the yield-to-maturity (YTM) of shorter-horizon funds rising at a faster pace than medium-to-longer-horizon funds.

 

In December, the YTM of overnight funds rose by 77 basis points (bps), while medium-to-longer-horizon funds like corporate bond and gilt saw YTMs rise by just 5-10 bps.

 

Experts said the mismatch was because the shorter-end of the yield curve was more responsive to interest rate changes than the medium-to-longer-end of the yield curve.

 

“The yields of short-term debt instruments are directly linked to the repo rate. That’s why they go up with every rate hike.