Yield Tracker

By Christine J. S. Castañeda, Senior Researcher
YIELDS on government securities (GS) rose last week amid a high September inflation print coupled with negative sentiment on the trade war between US and China.
Debt yields, which move opposite to prices, rose 41.64 basis points (bp) on average week on week, data from the Philippine Dealing and Exchange Corp. as of Oct. 12 showed.
Nicolas Antonio T. Mapa, senior economist at ING Bank N.V.-Manila Branch, said yields on government securities remained elevated due to the “still stubbornly high” inflation figures and “tighter liquidity conditions.”
“The slightly slower than anticipated inflation print may have helped counter the sustained rise but general expectation is for inflation to remain past the BSP’s (Bangko Sentral ng Pilipinas) target. BSP’s consistent messaging to stay hawkish may have also helped limit the increase in yields but with 10 Treasury yields still above 3.15%, the current levels will likely hold,” Mr. Mapa added.
For his part, UnionBank of the Philippines (UnionBank) chief economist Ruben Carlo O. Asuncion said: “This was probably brought by the general negative sentiment brought by the real impact of the trade war between the US and China.”
“Riskier assets are being sold off as investors are flocking to so-called haven (safer) assets,” Mr. Asuncion added.
The Philippine Statistics Authority reported earlier that headline inflation rose to 6.7% in September from 6.4% in August and 3.0% in the same month last year.
The latest inflation figure was the fastest in nearly a decade or since February 2009’s 7.2%.
Still, the official headline print was lower than BusinessWorld poll median and the central bank’s estimate of 6.8% and within BSP’s 6.3%-7.1% range. However, the September reading was higher than Department of Finance’s 6.4% estimate.
At the secondary market on Friday, with the exception of the 91-day Treasury bills (T-bill), all tenors saw their yields increase. At the short end, the 182- and 364-day T-bills rose by 14.08 bps and 30.69 bps to yield 5.5924% and 5.998%, respectively. On the other hand, the yield on the 91-day T-bill fell by 27.7 bps to 4.4397%.
In the belly of the curve, the two-year Treasury bond (T-bond) saw its yield rise by 106.5 bps to 7.4558%. Rates of the three- and four-year T-bonds also increased by 38.39 bps (6.9946%) and 3.55 bps (7.9712%). The five- and seven-year debt papers also gained 109.63 bps and 50.94 bps to fetch 8.1981% and 7.65%, respectively.
At the long end, the 10- and 20-year T-bonds saw their rates go up by 29.22 bps (8.0593%) and 61.09 bps (8.9288%).
Looking forward, UnionBank’s Mr. Asuncion expects yields to recover this week. However, he noted that there might be a “continuing negative sentiment” in the securities and foreign exchange markets due to the trade war between US and China.
For his part, ING’s Mr. Mapa said: “Market looks to global sentiment for direction and possible announcements from the BTr (Bureau of the Treasury) for direction.”

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