Taking off from the earlier post..I am not sure whether the interest rates have peaked. One look at the dynamic and income opportunity funds also proves what I say. Fund managers are also divided on whether interest rates have peaked. Frankly I do not care I do not have too much of a debt portfolio. Having PPF and SBI bonds (9.9% coupon) is not really of any use – after all in a dynamic world PPF is quite useless for action.

However the price of the SBI 15 year bond is 10,000 – but today i had an offer of Rs. 570 as a premium with the buyer willing to bear the sell side brokerage too. Of this I guess 1% must have come from the ‘brokerage’ got for mobilising. This means interest rates are headed up at least in the next 20-30 days? Not sure

The client being willing to pay a 5% premium is unthinkable – however if interest rates go up, this bond will be available at a discount. That will make it attractively priced…

One fund manager who runs a dynamic fund says – interest rates have peaked (no further increase possible), he says look for yield benefit and also play the duration game -as soon as interest rates start coming down take the moolah.

He feels FMP is fine, but a 1 year fund with a short term view is fine.

He feels you should stick to Income fund / dynamic opportunities funds…take your pick.