Avoid longer-duration funds as interest rates may harden: Analysts

Shorter-duration ones will see lower mark-to-market impact

The yield on the benchmark 10-year government securities (G-Secs) crossed the 6.5 per cent mark on January 4. With interest rates likely to harden in 2022, retail investors need to be careful while investing in debt mutual funds (MFs) or else they could face losses.
 
Inflation, global factors driving yields
 
One factor that has contributed to the recent hardening of yields is the higher-than-anticipated supply of SDLs (state development loans). Another is high energy prices.
 
Global interest rate movements have also played a part. “Globally, yields have hardened due to expectation of faster normalisation by central bankers