India's favoured 5-year bond trade loses steam with rate cuts priced in, fund managers say
MUMBAI, June 5 (Reuters) - A widely popular strategy of investing in India's five-year government bonds is losing its appeal as the security has now nearly priced in likely rate cuts, five fund managers said on Thursday.
Heavy buying in the 6.75% 2029 bond has knocked down the yield by 80 basis points (bps) since March, among the steepest declines across dated securities and only behind two- and three-year bond yields.
The five-year bond is also trading 15 bps below the policy repo rate of 6%, the deepest inversion in 11 years.
"The yield is trading sharply below the repo rate due to multiple factors, but this move is now overdone," said Murthy Nagarajan, head of fixed income at Tata Asset Management.
The Reserve Bank of India (RBI) is expected to lower rates by at least another 50 bps in the coming months.
The five-year segment appears to have priced in most of the anticipated easing, said Laukik Bagwe, fund manager and head of fixed income at ITI Mutual Fund.
"While the shorter end of the curve has outperformed, further gains may be limited without clearer signals from the RBI."
Still, foreign investors, including Nomura, Standard Chartered Bank and BofA Securities, have suggested investing in the five-year part of the curve, noting that liquidity infusions from the central bank will bode well for shorter-duration bonds.
The 2029 bond has remained among the five most traded papers over the last couple of months.
Fund managers say that the focus may now shift to 10-year debt.
"We expect benchmark 10-year bond yield to grind towards 6% level in the medium term," said Dhawal Dalal, president and CIO - fixed income at Edelweiss Asset Management.
Dalal expects the repo rate to settle between 5.25% and 5.50%.
Tata Asset Management's Nagarajan also expects the 10-year bond to outperform hereon, with the yield seen moving towards 6.10%.
The 10-year yield has fallen by 39 bps since March, widening its spread over the five-year yield to 35 bps - the highest in three years.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Sun
37 minutes ago
- The Sun
I jetted to China to furnish my UK house – for £1k I got a king-sized bed, mattress, tables, chairs and MORE
A YOUNG woman has jetted off to China to furnish her UK house. Shirley Bekker took to social media to share her experience, leaving people stunned by just how affordable it was. 2 She decided to spend six days in Foshan, China, to find furniture for her new house. And it seems to have worked in her favour; not only does she cut out the middleman by going to the manufacturers directly, but she was also able to get her furniture customised to her liking. Shirley spent the day looking for furniture for her bedroom and managed to kit it out for just £1,000. First, she looked for the ideal mattress to take home along with a bedframe. She ended up finding both and was able to customise the colour of the bedframe. In total, the two pieces cost her just £350. Next, she spotted a large chair and foot stool for her bedroom to match her new bed frame. "Shirley almost choked on her own saliva when the man said £185 for the set. But she quickly calmed down," the video read. "After reverse search imaging the chair, it revealed that the chair alone costs thousands of pounds in the UK. Eventually, she shook hands at £165." Next, she found a dressing table and chair that she was also able to customise for £170. Shoppers urged 'not to blink' and get their hands on Home Bargains garden essential that sold out fast last time and it makes your garden extra cute - TikTok homebargainsofficialuk While she was meant to be shopping for her bedroom, Shirley got distracted with the outside furniture and picked up an egg chair for just £45. She also bought a table and chair set for outside as well as a TV stand. "I spent £1000 today and managed to buy: king-sized custom bed, perfect mattress for my back, egg chair, Bistro table and chair, TV table, 6 handmade ceramic pots, dressing mirror, Japanese style chair and pouffe," added Shirley. The clip went viral on her TikTok account @ shirley_bekker with 319k views and 47k likes. People were quick to share their thoughts and were eager to try it for themselves. One person wrote: "Ok I've seen enough… anyone wanna go China and go halves on a shipping container to the UK???" Another commented: 'How much to ship to the UK? Cos I'm gonna need to book a flight to China." "Oh so we're being ripped off real bad here in the UK," penned a third. Meanwhile a fourth said: "This is crazy. I might make a trip too." "I have never been so influenced to go to China,' claimed a fifth. Someone else added: '£350 for the whole bed is insane."
Auto Blog
an hour ago
- Auto Blog
Mazda's Revolutionary SKYACTIV-Z Engine Promises Unheard-Of Efficiency & Power
Mazda's SKYACTIV-Z tech could change the way automakers and drivers look at gas-powered engines amid today's significant EV investment push. Mazda isn't giving up on gas-powered engines Mazda's SKYACTIV-Z project has highlighted the automaker's desire to continue innovating gas-powered engines while other legacy manufacturers accelerate investments into electric powertrain development. As a result, Mazda is establishing a portfolio balancing internal combustion engine (ICE), hybrid, and all-electric models, adapting to market demand. Mazda's current SKYACTIV-Z initiative aims to create a gas-powered engine that can combust with leaner fuel mixtures, resulting in better fuel economy, lower emissions, heightened performance, greater reliability, and simplified maintenance. SKYACTIV-Z tech also converts heat normally escaping from an engine into power for improved thermal (engine) efficiency. Expert engineer Masahisa Yamakawa at Mazda said that heat insulation was the only unexplored area among the seven controlled factors that improve thermal efficiency. SKYACTIV-Z strives to offer high thermal efficiency at any RPM or speed range, achieving better fuel efficiency when an engine is running on its own while supplying greater synergistic benefits when combined with electric motors. These synergistic effects include even higher fuel economy, lower emissions, and enhanced driving performance. Mazda CX-5 Skyactiv Engine — Source: Mazda Carbon neutrality in an ICE vehicle? While carbon negativity is often linked with all-electric vehicles, Mazda is working toward carbon negativity with gas-powered engines. More specifically, the automaker is exploring SKYACTIV-Z's potential to be used with carbon-neutral fuels and testing carbon capture tech using a substance called zeolite in the exhaust pipe to absorb CO2. Combined, these two strategies could facilitate carbon neutrality in an ICE vehicle. Mazda is also working toward fulfilling the potential of internal combustion engines to release air with less CO2 than they take in, thus cleaning the environment. Michiharu Kawano, another leading ICE developer at Mazda, said: 'As things stand, it's unlikely that all cars will be replaced by battery EVs. Which is why I believe we were right to persevere with the internal combustion engine. Whether generating electricity with an engine to turn the wheels or using a motor to complement the engine's power, hybrid systems require an internal combustion engine. Even with electrification, with the exception of battery EVs, we'll still be considering solutions based on internal combustion engines. With highly efficient internal combustion engines, we can make motors smaller, which should also help control electrification costs.' Autoblog Newsletter Autoblog brings you car news; expert reviews and exciting pictures and video. Research and compare vehicles, too. Sign up or sign in with Google Facebook Microsoft Apple By signing up I agree to the Terms of Use and acknowledge that I have read the Privacy Policy . You may unsubscribe from email communication at anytime. Mazda Motors President Takashi Yamanouchi stands among the company's next-generation gasoline and diesel engines, SKYACTIVE-G — Source:If SKYACTIV-Z comes to fruition, it won't be the first time the public has experienced benefits from SKYACTIV tech. In 2010, the SKYACTIV-G debuted in the Mazda 2 and achieved a hybrid-level fuel efficiency of about 70 mpg based on the Japanese 10-15 test cycle using only internal combustion, without relying on motor assistance. Research efforts for the SKYACTIV-G began in 2005, and the tech's breakthrough followed Mazda's confirmation that compression ratio significantly impacts thermal efficiency. The seven control factors related to ideal combustion were thus identified as compression ratio, air-fuel ratio, combustion period, combustion timing, wall surface heat transfer, pumping loss, and mechanical loss. SKYACTIV tech made its debut in the Mazda2 Final thoughts Mazda's SKYACTIV-Z is a 2.5L inline 4-cylinder engine that is currently being tested and meets stringent European and North American emissions standards, while boasting strong performance. If actualized in production, SKYACTIV-Z will simultaneously elevate fuel efficiency and performance while keeping costs affordable. SKYACTIV-Z is scheduled to debut in the Mazda CX-5's next generation in 2027. About the Author Cody Carlson View Profile
Reuters
2 hours ago
- Reuters
UK and India discuss 'counter-terrorism' cooperation after Pakistan ceasefire
NEW DELHI, June 7 (Reuters) - Britain and India on Saturday discussed expanding their "counter-terrorism" collaboration following recent fighting between India and Pakistan, Britain's foreign minister told Reuters after meeting Indian Prime Minister Narendra Modi. British foreign minister David Lammy is the highest-profile Western official to have visited both New Delhi and Islamabad since the South Asian neighbours agreed to a ceasefire last month after their worst fighting in nearly three decades. The latest tensions began in April after the killing of 26 men in Indian Kashmir that New Delhi blamed on "terrorists" backed by Pakistan, a charge Islamabad denied. India then attacked what it called "terrorist infrastructure" in Pakistan, leading to escalation from both sides until a May 10 ceasefire. "We want the situation to be maintained, but of course we recognise fragility, particularly in the backdrop of terrorism, terrorism designed to destabilise India," Lammy said in an interview at the residence of the British High Commissioner in New Delhi. "We are keen to continue to work with our Indian partners on counter-terrorism measures." He said he discussed the next steps with both Modi and Indian Foreign Minister S. Jaishankar, but gave no specifics. Last year, India and Britain discussed, opens new tab combating the financing of terrorism, cooperation between law enforcement and judicial bodies and information sharing. Lammy said he also discussed boosting trade between the world's fifth and sixth largest economies. The countries concluded talks for a free trade deal early last month. "I know that Prime Minister Keir Starmer is very much looking forward to coming to India very soon to sign the free trade agreement," Lammy said. "There is so much that our two nations can continue to do together."
