Lack of liquidity in the debt markets hurts MF investors in debt categories

Lack of liquidity in the debt markets has started to hurt mutual fund (MF) investors in debt categories, with yields in shorter-tenure markets moving up 100-150 basis points in the current month.

Over a one-month period, medium-duration schemes have given negative returns of 3.4 per cent, while short-duration and low-duration schemes are down 1.7 per cent and 1.9 per cent, respectively.

Experts say there has been heavy selling of shorter-tenure bonds in the markets, and given the lockdown, their buying capacity has shrunk significantly.