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Lower yields prop up gilt fund NAVs

Dec 21, 2000

News reports reveal that bond yield on 10-year government paper has fallen below 11%. This implies higher bond/gilt prices, which has propped up gilt funds net asset values (NAVs). According to reports in leading business dailies, yield on 10-year government paper fell below the 11% mark for over 6 months. In simpler terms bond/gilt prices have appreciated. This has pushed up the net assets of gilt fund portfolios, translating into higher net asset values (NAVs).

Open-ended, Gilt Schemes NAV
(Rs)
Last
week
Last
month
Last
year
Since
inception
JM G-Sec (PFP) (Gr) 12.0 1.2% 2.3% 16.1% 16.5%
JM G-Sec (RP) (Gr) 11.9 1.1% 2.4% 15.2% 15.3%
Templeton Govt Sec (Gr) 12.3 1.1% 2.5% 14.4% 14.7%
Birla Gilt Plus (LT) (Gr) 11.7 1.1% 2.4% 13.1% 13.7%
Tata Gilt Sec. A (Reg) 10.8 0.9% 1.3% 14.1% 14.1%
K Gilt Serial 2007 (Gr) 11.5 0.9% 1.9% 13.6% 13.8%
DSP ML G-Sec. Fund A(Gr) 11.7 0.8% 2.2% 13.3% 13.7%
Dundee Sov. Trust (Gr) 11.9 0.8% 2.2% 10.5% 11.3%
Pru ICICI Gilt(IP)(Gr) 11.8 0.7% 1.9% 12.6% 12.9%
Tata Gilt Sec. B (App) 12.0 0.7% 1.7% 15.6% 15.6%
K Gilt Investment (Gr) 12.5 0.6% 1.6% 11.4% 12.0%
Zurich(I) Sov Gilt (PT)(Gr) 10.5 0.6% 1.6% 0.0% 6.4%
Birla Gilt Plus Inv. (Gr) 11.3 0.5% 1.5% 10.6% 11.0%

Lower bond yields are driven by improved perception on the interest rate front. Investors expect a reduction in interest rates in the near term. Whether this actually happens is another matter altogether, as the Reserve Bank of India (RBI) has not implied this in any manner. However, for the time being, gilt fund investors won’t be complaining.

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