Aditya Birla Sun Life Mutual Fund

Monthly Fixed Income Update - June 2018

Monthly Fixed Income Update - June 2018

Aug 11, 2018
5 mins | Views 186
  • Domestic growth indicators have continued to maintain a strong momentum even as the INR along with other currencies from the emerging markets have weakened considerably over the past few weeks.
  • Trade war fears have dragged most other commodities lower and growth forecasts across different countries are being reviewed.
  • Concurrent growth data has not surprised negatively and therefore shorter tenor rates continue to be at elevated levels in most countries.
  • The fixed income markets remained relatively stable in the past month. Even with RBI hiking repo rate by 25 bps, government bonds & corporate bond yields remained range bound.
  • Global factors like growth and crude prices along with local factors like Minimum Support Price (MSP) which could be inflationary and will be crucial in deciding the course of interest rates and bond markets going forward.

Outlook
  • Retail investors who wish to take exposure to low duration higher credit quality funds can consider Aditya Birla Sun Life Short Term Opportunities Fund.
  • Investors may also take exposure to our credit portfolios like Aditya Birla Sun Life Credit Risk Fund &Aditya Birla Sun Life Medium Term Plan.

Source: Bloomberg, ABSL AMC Internal Research

Portfolio Action
  • Aditya Birla Sun Life Short Term Opportunities Fund(An open ended short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 1-3 years):

    Global cues continued to drive long term rate expectations in June. The domestic interest rate swap market has priced about 50bp of hike in the next 6 months.Our assessment continues to suggest that shorter end of the curve is pricing excessive pessimism. Hence, it presents a good opportunity for reinvestment.
  • Aditya Birla Sun Life Credit Risk Fund (formerly known as Aditya Birla Sun Life Corporate Bond Fund) (An open ended debt scheme predominantly investing in AA and below rated corporate bonds):

    We continue to build exposure towards high yield papers (below AA rated) which are offering good risk reward proposition.Such papers offer opportunities to build customized structure. We intend to keep adding credit structures with adequate covenants to mitigate risk.
  • Aditya Birla Sun Life Medium Term Plan (An open ended medium term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3-4 years):

    We have been managing this fund with the dual objective of building a good quality accrual portfolio along with managing the duration actively.In the last few months, several interesting opportunities have presented themselves in the credit markets and we have benefited by adding some credit structures in our funds. Regulators are also taking active interest in developing various facets of corporate bond markets like liquidity, new class of issuances etc. which will result in healthy activity in the credit market.
 
Aditya Birla Sun Life AMC Ltd /Aditya Birla Sun Life Mutual Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments
 
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
 
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