Top India Fund Goes Long Cash After Jump in Rates Volatility
Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai, India(Photographer Dhiraj Singh/Bloomberg)

Top India Fund Goes Long Cash After Jump in Rates Volatility

The turmoil in bonds that’s recently roiled asset classes worldwide has prompted India’s biggest fund manager to hold more cash.

SBI Funds Management Pvt. is deploying funds in the overnight repo markets, Rajeev Radhakrishnan, head of fixed income, said in an interview earlier this week. The $63 billion asset manager has also been reducing duration in its debt funds.

The U.S. Treasury yield curve steepened after Federal Reserve Chair Jerome Powell stressed Wednesday that the central bank won’t raise interest rates until the U.S. economy shows tangible evidence it has fully healed from Covid-19. The yield on benchmark 10-year Indian bonds surged three basis points to 6.22% Thursday.

Some money managers turned wary of taking big positions in fixed-income in recent weeks, amid speculation that vaccine progress could add to inflationary pressure. In India’s case, higher oil prices are a particular risk given the country relies heavily on imports. A record government borrowing program has also pushed up yields.

“In such a volatile situation, we’ll continue with this strategy and take our time to redeploy the cash,” Radhakrishnan said.

Top India Fund Goes Long Cash After Jump in Rates Volatility

Read more on Radhakrishnan’s views on the nation’s credit market

The shift was already underway earlier this year. The latest factsheet shows that SBI’s Dynamic Bond Fund’s cash holding rose to 32.5% as of the end of January, compared with 8.4% at the end of June.

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