2009 Turned Out To Be Worst for Gilts Funds

2009 turned out to be a worst for gilt funds

.

2009 turned out to be one of the worst for gilt funds, which offered the best returns to investors in a gloomy and uncertain 2008.

.

On the other hand, 2009 proved to be a good year for diversified equity mutual funds (MFs).

.

Most gilt funds gave more than 20% growth in 2008 with the best one topping the performance chart with a 44.8% increase in a year which saw equity funds post 34.2% to 80.4% losses.

.

While diversified equity funds are back on top this year, gilt funds have slipped considerably due to the sharp rise in yields on government securities (G-Secs).

.

The yield on the 10-year government bond has moved up by about 2.5% in 2009 bringing down bond prices.

.

Prices of the 6.05% 10-year government bond issued in February 2009 is about Rs 11 lower than its opening price.

.

Bond prices and bond yields are inversely related.

Rising yields have pushed down bond prices affecting the performance of gilt funds, which invest primarily in G-Secs.

.

Only seven out of the 40-odd medium-term and long-term gilt funds have shown growth in 2009 while the 15-odd short-term gilt funds have shown only a marginal increase.

.

While the market was expecting net government borrowings at Rs 1.1 lakh crore, it came at over Rs 3 lakh crore.

The gross borrowings for financial 2010 would be around Rs 4.51 lakh crore.

🙂

One response to this post.

  1. Good points, I think I will definitely subscribe! I’ll go and read some more! What do you see the future of this being?

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: