We highlight our view on the rise in interest rates and the measures we have taken in our debt scheme portfolios to sail through the volatility in the fixed-income market. Check out the PDF to know more.

1. 1

2. Introduction
Since the start of 2022, we have been cautioning of a changing landscape in the
fixed-income market.
These shifts have begun to materialize as the Reserve Bank of India has departed
from its accommodative stance and brought many changes in a short span of time.
We present our view and recommendations to ride the rising tide of interest rates.
Click to view
previous
communications:
Tide is Turning and Shifting Gears
2

3. First, we point to the shift in RBI’s focus from GROWTH to tackling the high INFLATION
RBI’s Shift of Focus
Then
Now INFLATION
GROWTH
3

4. Highlights of the RBI’s Monetary Policy (MPC) in May 2022
The Reserve Bank of India (RBI) surprised the markets with an off-cycle MPC meeting on May 4, 2022.
Following is a summary of actions taken at the meeting:
SHIFT IN LANGUAGE OF THE RBI IN THE MONETARY POLICY COMMITTEE
Repo rate hiked to
4.40% from 4%.
Cash Reserve Ratio (CRR)
hiked to 4.50% from 4%.
Focus on taming high
inflation.
“..to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while
supporting growth.”
”.. the risks to the near-term inflation outlook are rapidly materializing..”
“….the MPC expects inflation to rule at elevated levels, warranting resolute and calibrated steps to anchor inflation expectations and contain second
round effects….”
Source: The Reserve Bank of India (RBI); FY: Financial Year; LAF: Liquidity Adjustment Facility; SDF: Standing Deposit Facility; MSF: Marginal Standing Facility
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5. Decoding RBI’s Actions
To really understand the impact of RBI’s actions, we have to first decode the LAF Corridor.
The LAF Corridor is the window for movement of overnight interest rates in the economy.
Depending on liquidity situations, the overnight interest rate will be closer to one of the corridor rates.
MSF: Marginal Standing Facility; SDF – Standing Deposit Facility; LAF- Liquidity Adjustment Facility;
LAF Corridor Liquidity Conditions Guiding Rate
Ceiling Tight/Deficient MSF or Bank Rate
Target Adequate Repo Rate
Floor Surplus/Abundant SDF Rate Present situation
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6. Liquidity Adjustment Facility (LAF) Corridor
*RBI: The Reserve Bank of India; MSF: Marginal Standing Facility
What does each of the LAF corridor rates do?
MSF Rate/Bank Rate
Repo Rate
Standing Deposit Facility
Reverse Repo
RBI lends to banks at this rate above its normal Repo
lending
Rate at which RBI lends to banks during its normal liquidity
operations
Banks can park excess liquidity at the RBI, without
collateral
Rate at which banks park excess liquidity with RBI, with
collateral
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7. Changes to the Liquidity Adjustment Facility (LAF) Corridor
The LAF Corridor has undergone drastic changes in a short span of time.
MSF: Marginal Standing Facility; SDF – Standing Deposit Facility; LAF- Liquidity Adjustment Facility; MPC – Monetary Policy Committee; bps – basis points
LAF Corridor Before April 2022 Post April 2022 MPC Post May 2022 MPC
Ceiling of Corridor
Target Rate
Floor of Corridor
MSF – 4.25%
Repo Rate – 4%
Reverse Repo – 3.35%
MSF – 4.25%
Repo Rate – 4%
SDF – 3.75%
SDF Introduced as new floor at
3.75%. LAF Corridor narrowed to 50
bps making Reverse Repo irrelevant
40 bps hike
across corridor
MSF – 4.65%
Repo Rate – 4.40%
SDF – 4.15%
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8. Short- to medium-end
most affected by rate
hikes.
Longer-end less
impacted.
This has brought
down term spreads.
Impact on the Market
Source: CRISIL; Before data as on 31 March 2022 and Now data as on 10 May 2022. CB – Corporate Bond. Term Spreads is difference in yields in long-term and short-term bonds.
Yield Curve Change
Short-end
Instrument
Call Rate
1-year G-sec
10-year AA CB
Before April 2022
3.00%
4.32%
9.83%
Now
3.80%
5.77%
10.45%
80 bps
145 bps
62 bps
1-year AAA CB 5.00% 6.20% 120 bps
1-year AA CB 7.12% 8.32% 120 bps
5-year G-sec 6.09% 7.18% 109 bps
Middle 5-year AAA CB 6.30% 7.45% 115 bps
5-year AA CB 9.00% 10.15% 115 bps
10-year G-sec 6.82% 7.31% 49 bps
Long-end 10-year AAA CB 7.13% 7.75% 62 bps
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9. Our View
We expect the RBI to
intensify its battle against
high inflation while putting
growth on the back-burner.
We expect a series of
repo rate hikes in the
upcoming meetings.
Fixed-rate bond prices will
get affected with rising
interest rates.
Floating-rate instruments
can do well going ahead.
Expect gradual withdrawal
of surplus liquidity from the
system.
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10. Here is a list of things we have done to prepare our debt scheme
portfolios for riding the interest rate upcycle.
Thinking Ahead
Added Natural
Floating
Rate Instruments
Managing
Duration Actively
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11. Data as on April 30, 2022. Excludes exposure towards Synthetic floating rate bonds, fixed rate bonds, cash and net current assets.
We have increased our exposure towards floating rate bonds in most of our schemes which bodes well in a
rising interest rate cycle
Turning Tides: Increase Exposure to Floating Rate Bonds
Scheme Name
ICICI Prudential Floating Interest Fund
ICICI Prudential Gilt Fund
ICICI Prudential Savings Fund
ICICI Prudential Corporate Bond Fund
ICICI Prudential All Seasons Bond Fund
ICICI Prudential Short Term Fund
ICICI Prudential Banking & PSU Debt Fund
ICICI Prudential Bond Fund
ICICI Prudential Medium Term Bond Fund
ICICI Prudential Credit Risk Fund
Exposure to Natural Floating Rate Bonds
65.81%
61.78%
50.78%
43.72%
32.33%
30.16%
25.52%
22.49%
6.94%
6.54%
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12. 12
In response to rising interest rates we have also lowered the modified duration in our debt schemes to
contain the mark-to-market impact from fall in bond prices.
Turning Tides: Dynamic Duration Management
Data as on April 30, 2022 and Dec 31, 2021. Modified Duration is the measurable change in the value of a security in response to a change in interest rates.
Scheme April 2022 (Years) Dec 2021 (Years) Difference (Years)
ICICI Prudential Overnight Fund 0.01 0.01 0
ICICI Prudential Liquid Fund 0.11 0.09 0.02
ICICI Prudential Ultra Short Term Fund 0.30 0.27 0.03
ICICI Prudential Savings Fund 0.86 0.90 -0.04
ICICI Prudential Floating Interest Fund 0.92 1.48 -0.56
ICICI Prudential Money Market Fund 0.41 0.17 0.24
ICICI Prudential Corporate Bond Fund 1.22 2.81 -1.59
ICICI Prudential Banking & PSU Debt Fund 2.11 3.85 -1.74
ICICI Prudential All Seasons Bond Fund 2.82 3.65 -0.83
ICICI Prudential Short Term Fund 1.81 2.17 -0.36
ICICI Prudential Medium Term Bond Fund 2.36 3.31 -0.95
ICICI Prudential Credit Risk Fund 1.57 1.94 -0.37
ICICI Prudential Bond Fund 3.14 4.91 -1.77
ICICI Prudential Constant Maturity Gilt Fund 6.74 6.97 -0.23
ICICI Prudential Gilt Fund 1.76 7.47 -5.71
ICICI Prudential Long Term Bond Fund 6.90 8.44 -1.54

13. Our Recommendation
FLOATING RATE BONDS
WHY?
Coupon increases with rise in interest rates and yields.
Mark-to-market (MTM) gain
Offer extra coupon due to spread component which results
in better returns
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14. Coupon Resets in Floating Rate Bonds
1. COUPON INCREASES WITH RISE IN YIELDS
Floating Rate Bonds (FRB) offer a coupon tied to a benchmark rate like MIBOR or T-Bill. The coupon resets periodically with a change in its
benchmark yield.
Source: RBI. 6 Months T-Bill Average of Weighted Average Yield in Last 3 auctions as on May 4, April 27 and April 20, 2022 plus spread of 1.22% to arrive at the expected coupon reset of GOI FRB 2033:
Government of India 2033 Floating Rate Bond. Past performance may or may not be sustained in the future.
Date GOI FRB 2033 Coupon Resets 6M T-Bill
19-06-2020 4.65% 3.43%
22-09-2020 4.70% 3.48%
22-03-2021 4.70% 3.48%
22-09-2021 4.62% 3.40%
22-03-2022 5.53% 4.31%
10-05-2022* 5.62% 4.40%
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15. Why Floating Rate Bonds?
2. MARK TO MARKET (MTM) GAIN
RBI’S STANCE - Moving from DOVISH to HAWKISH
WE EXPECT HIGHER DEMAND FOR FLOATING
RATE BONDS - Due to rising interest rates
BORROWING CALENDAR FOR FLOATING
RATE BONDS - No Increase in Issuances
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16. Why Floating Rate Bonds?
3. FLOATING RATE BONDS OFFER EXTRA COUPON RATE OVER ITS BENCHMARK
The coupon on a floating rate bond changes at a pre-defined intervals (like 6 months). The new coupon rate is decided by checking the latest
yields on its benchmark (e.g. 6-M T-bill) and a spread is added. The spread gives extra returns compared to buying the benchmark paper.
T-bill: Treasury Bill. Y:Year; H:Half. The above representation is for illustration purpose and actual result may vary. Please note: The spread is a function of several factors including the credit spread of the
issuer to the outlook on interest rates and demand and supply conditions
Timeline 6M T-Bill Yields (%) Spread (%) Effective Coupon Rate (%)
Issue Date 3.50 1.20 4.70
Y1H2 3.75 1.20 4.95
Y2H1 4.00 1.20 5.20
Y2H2 4.25 1.20 5.45
Y3H1 4.50 1.20 5.70
Y3H2 4.75 1.20 5.95
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17. Summary
Floating rate bonds has
the ability to outperform
other instruments in the
fixed income space in a
rising interest rate
cycle.
Longer duration debt
papers offer attractive
yield and are relatively
better from effects of
rate hikes.
We expect yield
curve to flatten and
term spreads to
compress further.
Spread assets are
also attractive due
to their higher yield.
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18. Scheme Risk-o-meters
Please note that the Risk-o-meter(s)
specified will be evaluated and updated on
a monthly basis. The above riskometers are
as on April 30, 2022. Please refer to
https://www.icicICICIPrudentialamc.com/ne
ws-and-updates/all-news for more details.
ICICI Prudential Overnight Fund
(An open ended debt scheme investing in overnight securities. A relatively low interest rate risk and relatively
low credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Low risk
This Product is suitable for investors who
are seeking*:
• Short term savings
• An overmight fund that aims to provide
reasonable retums commensurate with low
rish and providing a high level of liquidity.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Liquid Fund
(An open ended liquid scheme. A relatively low interest rate risk and moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Short term savings solution
• An liquid fund that aims to provide reasonable
returns commensurate with low risk and
providing a high level of liquidity.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Money Market Fund
(An open debt scheme investing in money market instruments. A relatively low interest rate risk and
moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Short term savings
• A money market scheme that seeks to provide
reasonable returns, commensnsurate with low
risk while providing a high level of liquidity.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Savings Fund
(An open ended low duration debt scheme investing in instruments such that the Macaulay duration of the
portfolio is between 6 months and 12 months. A relatively high interest rate risk and moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Low to
Moderate risk
This Product is suitable for investors who
are seeking*:
• Long term wealth creation
• An open ended scheme that seeks to generate
regular income through investments in fixed
income securities and aim for long term capital
appreciation by investing in equity and equity
related instruments.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
18

19. Scheme Risk-o-meters
Please note that the Risk-o-meter(s)
specified will be evaluated and updated on
a monthly basis. The above riskometers are
as on April 30, 2022. Please refer to
https://www.icicICICIPrudentialamc.com/new
s-and-updates/all-news for more details.
ICICI Prudential Corporate Bond Fund
(An open ended debt scheme predominantly investing in AA+ or above rated corporate bonds. A relatively
high interest rate risk and moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Short term savings
• An open ended debt scheme predominantly
investing in highest rated corporate bonds.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Banking & PSU Debt Fund
(An open ended debt scheme predominantly investing in Debt instruments of banks, Public Sector Undertakings,
Public Financial Institutions and Municipal bonds. A relatively high interest rate risk and moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Short term savings
• An open ended debt instruments of banks,
public sector undertakings, public financial
institutions and municipal bonds
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Floating Interest Fund
(An open ended debt scheme predominantly investing in floating rate instruments (including fixed rate
instruments converted to floating rate exposures using swaps/derivatives). A relatively high interest rate risk
and moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Short term savings
• An open ended debt scheme predominantly
investing in floating rate instruments
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Short Term Fund
(An open ended short term debt scheme investing in instruments such that the Macaulay Duration of the
portfolio is between 1 and 3 years. A relatively high interest rate risk and moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Short term income generation and capital
appreciation solution
• A debt fund that aims to generate income by
investing in a range of debt and money market
instruments of various maturities.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
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20. Scheme Risk-o-meters
Please note that the Risk-o-meter(s)
specified will be evaluated and updated on a
monthly basis. The above riskometers are
as on April 30, 2022. Please refer to
https://www.icicICICIPrudentialamc.com/new
s-and-updates/all-news for more details.
ICICI Prudential Ultra Short Term Fund
(An open ended ultra-short term debt scheme investing in instruments such that the Macaulay duration of the
portfolio between 3 months and 6 months. A moderate interest rate risk and moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate High
risk
This Product is suitable for investors who
are seeking*:
• Short term regular income
• An open ended ultra-short term debt scheme
investing in a range of debt and money market
instruments.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Medium Term Bond Fund
(An open ended debt scheme investing in instruments such that the Macaulay Duration of the portfolio is
between 3 and 4 years. The Macaulay duration of the portfolio is 1 Year to 4 years under anticipated adverse
situation. A relatively high interest rate risk and moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate High
risk
This Product is suitable for investors who
are seeking*:
• Medium term savings
• An debt scheme that invests in debt and
money market instruments with a view to
maximise income while maintaining optimum
balance of yield, safety and liquidity.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential All Seasons Bond Fund
(An open ended dynamic debt scheme investing across duration. A relatively high interest rate risk and
moderate credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate High
risk
This Product is suitable for investors who
are seeking*:
• All duration savings
• An debt scheme that invests in debt and
money market instruments with a view to
maximise income while maintaining optimum
balance of yield, safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Credit Risk Fund
(An open ended debt scheme predominantly investing in AA and below rated corporate bonds. A relatively
high interest rate risk and relatively high credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at High risk
This Product is suitable for investors who
are seeking*:
• Medium term savings
• A debt scheme that aims to generate income
through investing predominantly in AA and
below rated corporate bonds while maintaining
the optimum balance of yield, safety and
liquidity.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
20

21. Scheme Risk-o-meters
Please note that the Risk-o-meter(s)
specified above will be evaluated and updated
on a monthly basis. The above riskometers
are as on April 30, 2022. Please refer to
https://www.icicICICIPrudentialamc.com/new
s-and-updates/all-news for more details.
ICICI Prudential Bond Fund
(An open ended medium to long term debt scheme investing in instruments such that the Macaulay duration
of the portfolio is between 4 Years and 7 years. The Macaulay duration of the portfolio is 1 Year to 7 years
under anticipated adverse situation. A relatively high interest rate risk and moderate credit risk)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Medium to Long term savings
• An debt scheme that invests in debt and
money market instruments with an aim to
maximise income while maintaining an
optimum balance of yield, safety and liquidity.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Long Term Bond Fund
(An open-ended debt scheme investing in instruments such that the Macaulay duration of the portfolio is
greater than 7 Years. A relatively high interest rate risk and relatively low credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Long term wealth creation
• A debt scheme that inveata in debt and money
market instruments with an aim to maximise
income while maintaining an optimum balance
of yield, safety and liquidity.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Gilt Fund
(An open ended debt scheme investing in government securities across maturity. A relatively high interest
rate risk and relatively low credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Long teem wealth creation
• A Gilt scheme that aims to generate income
through investment in Gilts of various
matuities.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Constant Maturity Gilt Fund
(An Open Ended debt scheme investing in government securities having a constant maturity of 10 Years.
A relatively high interest rate risk and relatively low credit risk.)
RISKOMETER
Investorsunderstandthattheir
principalwill be at Moderate risk
This Product is suitable for investors who
are seeking*:
• Long term wealth creation
• A gilt fund that aims to provide reasonable
returns by investing in portfolio of govemment
securities whil maintaining constant maturity
of the portfolio at 10 years.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
21

22. Potential Risk Class Matrix
As per SEBI Circular dated, June 07, 2021; the potential risk class (PRC) matrix based on interest rate risk and credit risk, is as below:
10
11
12
13
14
15
16
Scheme Name
ICICI Prudential Long Term Bond Fund
ICICI Prudential Gilt Fund
ICICI Prudential Constant Maturity
Gilt Fund
ICICI Prudential Credit Risk Fund
ICICI Prudential Liquid Fund
ICICI Prudential Money Market Fund
ICICI Prudential Ultra Short Term Fund
Position in the Matrix
SR
No.
SR
No.
Scheme Name Position in the Matrix
1 ICICI Prudential Overnight Fund
2 ICICI Prudential Savings Fund
3 ICICI Prudential Floating Interest Fund
4
5
6
7
ICICI Prudential Medium Term Bond Fund
ICICI Prudential All Seasons Bond Fund
ICICI Prudential Corporate Bond Fund
ICICI Prudential Banking & PSU Debt Fund
8 ICICI Prudential Short Term Fund
9 ICICI Prudential Bond Fund
22

23. Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully
All figures and other data given in this document are dated. The same may or may not be relevant at a future date. The AMC takes no responsibility of updating any data/information in this material from
time to time. The in- formation shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written
consent of ICICI Prudential Asset Management Company Limited. Prospective investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial
implicationor consequenceof subscribing to the units of ICICI Prudential Mutual Fund. Data source:Bloomberg,except as mentioned specifically.
Disclaimer: In the preparation of the material contained in this document, ICICI Prudential Asset Management Company Ltd. (the AMC) has used information that is publicly available, including information
developed in-house. Some of the material used in the document may have been obtained from members/persons other than the AMC and/or its affiliates and which may have been made available to the
AMC and/or to its affiliates. Information gathered and material used in this document is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and / or com-
pleteness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and similar
expressions or variations of such expressions, that are “forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertain-
ties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on
our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices
etc. ICICI Prudential Asset Management Company Limited (including its affiliates), the Mutual Fund, The Trust and any of its officers, directors, personnel and employees, shall not liable for any loss,
damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner.
Further, the information contained herein should not be construed as forecast or promise. The recipientalone shall be fully responsible/are liable for any decision taken on this material.
Note: Macaulayduration is the weightedaverage term to maturity of the cash flows from the bond. The weight of each cash flow is determined by dividing the presentvalue of the cash flow by the price.
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