India’s largest mutual fund in terms of assets under management is avoiding exposure to ultra-long duration debt despite New Delhi lowering its supply, and prefers 5-to-10 year government bonds and shorter tenor corporate notes, a top executive said.
The government reduced the share of ultra-long 30-50 year bonds for the fiscal year’s second half, while raising the same for 5-year and 10-year bonds after suggestions across investor segments.
“This (supply tweak) is a temporary fix,” said Rajeev Radhakrishnan, SBI Mutual Fund’s chief investment officer (fixed income), on Tuesday. The fund manages nearly ₹3 lakh crore of debt.
Radhakrishnan sees the rise in long-term bond yields as a structural issue.
The mismatch in supply and demand of long-term bonds was a result of multiple factors, including pension and insurance funds increasing equity allocations and taxation changes that hit debt flows into mutual funds and insurance products, he said.
“Given the overall weak demand and the fact that we are possibly at the late stage of the rate cycle, we would not want to be structurally overweight on long-end duration and prefer being invested in the most liquid segment of the curve,” Radhakrishnan said.
The veteran fund manager expects the central bank to hold rates steady on Wednesday, but does not rule out a 25-bps rate cut in December.
Radhakrishnan sees 1-3 year corporate bonds as a sweet spot, pointing out good spreads with government bond yields, ample liquidity and an appropriate level of supply.
Published on September 30, 2025