Posts Tagged ‘gross borrowings’

2009 Turned Out To Be Worst for Gilts Funds

2009 turned out to be a worst for gilt funds

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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.

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

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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.

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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).

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

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

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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.

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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.

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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.

🙂