What should debt mutual fund investors do after US Fed rate cut?
The long duration funds are highly sensitive to interest rate changes and provide potential for capital appreciation and are attractive options in the declining interest rate.
“After the Fed's 50 bps rate cut, long-duration funds are the better option. These funds are highly sensitive to interest rate changes, meaning they will benefit significantly from falling yields as bond prices rise. This provides potential for capital appreciation, making them attractive in a declining interest rate environment,” recommended Sagar Shinde, VP Research, Fisdom.
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Also Read | How a rate cut by US Fed will impact your equity mutual fund portfolio
The short duration funds in the declining interest rate scenario do not see the same level of price gains. So if the goal is to maximize returns post rate cut, investors should go for long duration bond funds for better prospects of capital appreciation.
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