India’s pension funds are urging the regulator to introduce a new “held-to-maturity (HTM)” debt category, allowing them to hold bonds until maturity and avoid daily mark-to-market price swings, according to sources familiar with the discussions.
The request follows a PFRDA proposal to value only long-term bonds on an accrual basis, while continuing mark-to-market valuation for others. Fund managers fear this could force frequent portfolio churn, increasing price volatility and ultimately hurting pension returns.
🔹 Why It Matters
- Pension funds are major bond investors, holding 58% of government bonds with maturities of 10 years or more, out of ₹8 trillion ($88B) in assets (PFRDA data).
- Managers argue that an HTM bucket would stabilize NAVs and better align long-term assets with pension liabilities.
- Recent regulatory moves allowing higher equity exposure have already reduced pension demand for bonds.
🔹 Market Impact
As pension funds shift away from debt, long-dated bond yields (15+ years) have risen 30–45 basis points this financial year, increasing borrowing costs and affecting portfolio values.
“With a separate HTM bucket, funds can manage long-dated bonds more smoothly and efficiently,” one source said.
The proposal is currently under review by the regulator, which has been steadily easing pension investment norms — including this week’s approval for investments in gold and silver ETFs.