InvestorQ : Why are gilt funds highly dependent on the change in interest rates?
Kalyani Sundaram made post

Why are gilt funds highly dependent on the change in interest rates?

Answer
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seema Upadhyaya answered.
1 year ago


This is a very good question.

Returns from a gilt funds are highly dependent on the change in interest rates as there is an inverse relationship between bond prices and interest rates.

Hence, when the interest rate falls, prices of government securities go up, benefiting the performance of gilt funds and vice versa.

Furthermore, gilt funds also give good returns when other asset classes like equity are not doing well, as debt and equity markets are inversely linked (when one does well, the other generally drops).