YIELDS ON government securities (GS) saw mixed movements at the close of the shortened trading week given the holiday pause as well as the market’s reaction to uncertainty surrounding the US-China trade talks and preparations ahead of the use of a new settlement system.
On average, GS yields — which move opposite to prices — were up by 7.44 basis points (bp), data from the Philippine Dealing & Exchange Corp. as of Aug. 24 showed.
Deanno J. Basas, president and managing director of ATR Asset Management (ATRAM) Trust Corp., attributed the slight increase in yields to “reduced market activity” due to holiday breaks that led to shortened trading during the week.
“The implementation of the new NRoSS (New Registry of Scripless Securities) of the Bureau of the Treasury (BTr) also kept investors sidelined,” Mr. Basas added.
Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, concurred.
“However, the rise in yields might have been response to recent uncertainties brought about by the US-China trade negotiations, which markets generally perceive as static,” he said.
The Treasury said in a memorandum last week that the submission of bids, confirmation of awards and settlement of results in GS auctions shall be made through the NRoSS system starting Tuesday as part of its modernization project to “service the settlement and recording of coupon-bearing government securities across different tax status of investors.”
The transition to the new system is part of the 18-month debt market reform plan of the BTr, the Bangko Sentral ng Pilipinas, the Securities and Exchange Commission and the Department of Finance envisioned to be in place by early 2019 designed to increase the supply of short-term securities, among others.
Meanwhile on the external front, the two-day US-China trade talks showed no progress as the two largest economies imposed new tariffs on each other despite earlier calls for a resolution to the dispute.
Mr. Asuncion said last week’s theme “may drag on as the trade negotiations between the US and China has drawn a blank.”
At the secondary market on Friday, yields on the 91-day Treasury bills (T-bill) rose the most at 49.26 bps to fetch 3.65%. This was followed by the seven-, three- and two-year debt papers, which increased by 33.58 bps (6.4821%), 23.10 bps (5.2946%), and 0.17 bp (5.2071%), respectively.
Meanwhile, yields on 182- and 364-day T-bills dropped 4.80 bps and 0.83 bp, respectively to end at 4.0414% and 4.8301%.
Similarly, the 20-, 10-, five- and four-year bonds saw their rates decline by 4.78 bps (7.2951%), 4.46 bps (6.7250%), 13.43 bps (5.7877%) and 3.43 bps (5.8425%), respectively.
“[I] think the market should continue to range around current levels over [this] week within liquidity from recent maturities and lower global yields to help cap any further uptick in yields,” ATRAM Trust Co.’s Mr. Basas said looking forward.
For UnionBank’s Mr. Asuncion, markets will also take their cue from the comments of US Federal Reserve Chair Jerome Powell at the Jackson Hole meeting last Friday.
In that meeting, the US central bank governor affirmed the approach of gradual rate hikes while downplaying the risk of the US economy overheating. — Reicelene Joy N. Ignacio
