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RBI rate hike risk rises: Bandhan AMC’s Suyash Choudhary dials back duration in bond portfolios
Suyash Choudhary, CIO – Fixed Income at Bandhan AMC, said the minutes of the RBI’s latest policy meeting have made the market increasingly focus on when rate hikes could begin rather than if they will happen.
According to Choudhary, the policy day had already suggested that both the possibility and timing of future rate hikes were being considered. However, the minutes appear to have tilted the balance more decisively towards the timing of hikes, while reducing the emphasis on whether a hike would be required at all.
“Once the market gets to the point of actively considering rate hikes, as it has, then both the quantum and timing start getting continually reassessed,” Choudhary said.
50 bps rate hike expectation now less certain
Choudhary said Bandhan AMC’s expectation so far had been for not more than 50 basis points of rate hikes. However, he acknowledged that the evolving policy narrative has made that assessment less certain.
“We are no longer sure whether 50 bps cannot eventually be 75 bps, or whether October policy should not be considered ‘live’ for the first hike,” he said.
The change in expectations marks a significant shift from the earlier environment, where the RBI’s focus on core inflation and the absence of signs of broad-based inflation had provided an important anchor for the bond market.The RBI had also scaled down its core inflation forecast, reinforcing expectations that the MPC would not be in a hurry to tighten monetary policy. Alongside this, FCNR flows and the associated demand for bonds had provided support to the market.
Why Bandhan AMC is cutting duration
Choudhary said fixed-income portfolios had been actively running duration for much of the year, primarily because of an uncertain global environment characterised by commodity and global yield volatility, as well as a relatively bearish domestic backdrop.
The domestic construct has also been complicated by what Choudhary calls the “Impossible Trinity”, which has been pressuring local financial conditions and limiting the transmission of RBI policy to market rates.
From time to time, the fund house had added duration based on near-term changes in the balance of risks, expectations that potentially constructive medium-term factors could emerge and cheaper market valuations.
However, the holding period or “shelf life” of such positions has been more uncertain than usual because of the broader market environment.
Against this backdrop, Bandhan AMC has again dialled back duration across a number of its funds, subject to individual fund mandates and existing positioning.
The primary way of reducing duration has been through cutting exposure to long-duration government bonds.
Bond curve could flatten as FCNR buying fades
Interestingly, Choudhary said relative valuations of long-duration government bonds versus shorter-tenor government securities still appear favourable.
However, the fund house expects the government bond curve to relatively flatten over the next few months.
Two factors are expected to drive this view: tapering of FCNR-related bond buying and growing market positioning for RBI rate hikes.
This could result in yields at the shorter end of the curve rising relatively faster than those at the long end as markets price in a higher likelihood of monetary tightening.
From a relative-value perspective, this could still make the long end attractive on a duration-adjusted basis because the rise in long-end yields may be slower than at the front end.
Overall duration risk takes priority
Despite the relative attractiveness of the long end, Choudhary said investors also need to manage their overall duration risk.
That consideration has prompted the fund house to reduce long-duration government bond positions on a standalone basis.
The timing is also important because market yields remain within the trading range seen since late June, providing an opportunity to reduce exposure without having to make the move after a sharp adverse move in yields.
For bond investors, the shift signals a more cautious stance after a period in which falling or stable rate expectations had supported duration strategies.
Choudhary stressed that the latest positioning reflects Bandhan AMC’s assessment at the current point in time and could change depending on how inflation, global yields, commodity prices, capital flows and RBI policy expectations evolve.
The key takeaway for debt investors is that the RBI rate cycle is no longer being viewed simply through the lens of whether hikes are possible; the market is increasingly debating their timing and magnitude — making duration management more important for bond portfolios.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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President Donald Trump signs an order renaming Lake Ontario to Lake America amid trade tensions with Canada.
Google Maps has begun displaying “Lake America” in place of Lake Ontario for users in the United States after President Donald Trump ordered the body of water renamed.
Google said the change began rolling out Saturday after the U.S. Geographic Names Information System (GNIS) formally updated the lake’s name from Lake Ontario to Lake America.
“Since we update Google Maps to reflect name changes in official government sources, which is GNIS for the U.S., people using Maps in the U.S. will see ‘Lake America,’ those in Canada will continue to see ‘Lake Ontario,’ and those outside of the U.S. and Canada will see both names,” Google said.
CANADA PLANS TARIFF RETALIATION AFTER TRUMP WARNS ITS LEADERS TO ‘FALL IN LINE’
US President Donald Trump displays a signed executive order in the Oval Office of the White House in Washington, DC, on Aug. 27, 2026. (Al Drago/The Washington Post/Bloomberg via Getty Images)
“These updates follow our long-standing policy for bodies of water with names that vary from country to country, and are starting to roll out now,” the company added.
White House communications director Steven Cheung highlighted the change on X on Sunday.
“It’s official! LAKE AMERICA on Google Maps,” Cheung wrote.
TRUMP SAYS 50% TARIFFS ON CANADIAN VEHICLE, STEEL IMPORTS TO HIT JAN 1
“Making the Great Lakes Even Greater” signage during an executive order signing in the Oval Office of the White House in Washington, DC, on Aug. 27, 2026. (Al Drago/The Washington Post/Bloomberg via Getty Images)
The update comes days after Trump signed an executive order Thursday directing the Interior Department to rename Lake Ontario to Lake America in the United States.
“The Lake will continue to play a pivotal role in shaping America’s future and the global economy,” Trump wrote.
“In recognition of this flourishing economic resource and its critical importance to our Nation’s economy and its people, I am directing that the Lake officially be renamed as Lake America.”
TRUMP PAUSES 50% TARIFFS ON CANADA HOURS BEFORE DEADLINE AFTER ANNOUNCING POTENTIAL DEAL
A Canadian flag flies along the Lake America waterfront in Toronto on Aug. 27, 2026. (Cole Burston / AFP via Getty Images)
The president’s decision also comes amid escalating trade tensions between Washington and Ottawa.
U.S. tariffs of 50% on about $20 billion worth of Canadian goods took effect Aug. 22 after trade talks collapsed.
Canada retaliated with tariffs on roughly $20 billion in U.S. imports that are set to take effect Sept. 8, according to Reuters.
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Google could not immediately be reached by FOX Business for comment.
Reuters contributed to this report.
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President Donald Trump says the U.S. can no longer absorb massive trade losses with Canada, dismissing concerns that the tariff fight could drive up costs for Americans ahead of the midterms.
President Donald Trump intensified his criticism of Canada on Sunday, accusing the country of “ripping” the U.S. off “for decades” as he defended his tariff policies and urged Canadian companies to move their operations south of the border.
In back-to-back Truth Social posts Sunday afternoon, Trump first credited tariffs with strengthening the U.S. auto industry and keeping American manufacturing plants open.
“When I announced that I was running in the 2024 Presidential Election, right at the beginning, Ford was getting ready to close their Big Factory, in Detroit,” Trump wrote.
Trump claimed the plant is now “running 24/7” and has become “one of the most profitable Car Plants in the World.”
CANADA PLANS TARIFF RETALIATION AFTER TRUMP WARNS ITS LEADERS TO ‘FALL IN LINE’
U.S. President Donald Trump is pictured during an event in the Rose Garden of the White House on Aug. 20, 2026, in Washington, DC. (Finn Gomez/Getty Images)
“There are many other examples, for both Ford, General Motors, and others. I’ve revived, and indeed saved, the Automobile Business in our America. That’s because of what I’ve done with TARIFFS,” he said.
Trump then shifted his focus to Canada, describing the longtime U.S. ally as one of the country’s “worst” trade offenders.
“One of the Worst Abusers is Canada. I don’t want Canadian cars, I don’t want Canadian parts, I don’t want Canadian anything. They’ve been ripping us off for decades, and it’s going to stop,” Trump wrote.
TRUMP SAYS 50% TARIFFS ON CANADIAN VEHICLE, STEEL IMPORTS TO HIT JAN 1
Canadian Prime Minister Mark Carney speaks at a press conference in Ottawa, Ontario, on Aug. 22, 2026, after trade talks with the US collapsed. (Dave Chan / AFP via Getty Images)
“This should have happened long ago with other Presidents, just as stopping Iran should have happened long ago,” he continued. “They want to be treated like a State, but they aren’t one. I deal with the Leadership of many Countries, but I find Canada to be the worst. They are entitled no longer!”
Minutes later, Trump followed up with another post urging Canadian companies that do business with the U.S. to relocate their operations south of the border.
“Let all Canadian Companies that are doing business with America move to the United States, immediately. Many of them are Companies that moved out years ago due to stupid U.S. Leadership. When you move back, there are no TARIFFS!” Trump wrote.
TRUMP FIRES BACK AT CANADA AFTER CARNEY SUSPENDS TRADE TALKS, ACCUSES US OF LAST-MINUTE ‘POWER PLAY’
Trump claimed the Ford plant is now “running 24/7” and has become “one of the most profitable Car Plants in the World.” (David Paul Morris/Bloomberg via Getty Images)
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The president’s comments come amid escalating trade tensions between the two longtime allies.
U.S. tariffs of 50% on about $20 billion worth of Canadian goods took effect Aug. 22 after trade talks collapsed. Canada retaliated with tariffs on roughly $20 billion in U.S. imports that are set to take effect Sept. 8, according to Reuters.
The White House, Canadian Prime Minister Mark Carney’s office, Ford Motor Co. and General Motors did not immediately respond to requests from FOX Business for comment.
Reuters contributed to this report.
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