Indian Debt Funds Cut Hedges as Oil Risks Inflate Rate-Hike Bets

Some Indian debt fund managers are cutting back on interest-rate hedges against their bond holdings, saying markets have already priced in an excessive rise in borrowing costs driven by a surge in oil prices.

Bandhan AMC Ltd. and ICICI Prudential Asset Management Co. are among those who have unwound their overnight indexed swap positions — an interest-rate derivative that, in the current market, benefits from a rise in rates. Sundaram Asset Management Co. also exited their hedge positions in relatively illiquid corporate bonds.