Yield Tracker

YIELDS on government securities inched down last week after the central bank lowered its inflation forecast and amid strong demand for the government’s retail Treasury bond (RTB) offer.

Debt yields, which move opposite to prices, went down by an average of 1.63 basis points (bps) on Friday from a week earlier, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates as of Nov. 19 published on the Philippine Dealing System’s website.

At the short end of the curve, the rates of the 91- and 182-day Treasury bills (T-bill) inched up by 0.38 bp (to 1.2171%) and 1.34 bps (to 1.4525%). Meanwhile, the yield on the 364-day T-bill declined by 1.65 bps to 1.641%.

Yields on the tenors at the belly of the curve mostly rose, with two-, three-, four-, five-, and seven-year tenors rising by 8.95 bps (to 2.7218%), 6.64 bps (to 3.3231%), 4.12 bps (3.8115%), 1.95 bps (to 4.1766%), and 0.55 bp (4.6427%), respectively.

At the long end, yields on the 10-, 20-, and 25-year T-bonds dropped by 7.63 bps (to 5.0937%), 15.26 bps (to 5.0657%), and 17.29 bps (to 5.0529%), respectively.

“Sentiment improved for local government securities compared to previous week. Local bond yields dropped slightly following the strong auction turnout of the Bureau of the Treasury’s retail Treasury bond offering and the central bank’s downward revision of 2021 inflation forecast,” a trader said in a Viber message.

The Treasury on Tuesday raised an initial P113.545 billion at its price-setting auction for its offer of 5.5-year RTBs. This was oversubscribed by more than five times versus the initial P30-billion offer. The RTBs had fetched a coupon rate of 4.625%.

National Treasurer Rosalia V. de Leon said the proceeds of the offering will fund the government budget. The RTB public offer will run until Nov. 26, unless closed earlier, and the bonds will be issued on Dec. 2.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) on Thursday kept interest rates at record lows, as expected by the market. BSP Governor Benjamin E. Diokno said continued support is needed to nurture the economy’s recovery that has already gained traction.

At the same meeting, the Monetary Board cut its inflation estimate for this year to 4.3% from 4.4% previously. Meanwhile, forecasts for 2022 and 2023 were kept at 3.3% and 3.2%, respectively.

Inflation in the first 10 months was at 4.5%, still above the BSP’s 2-4% target. In October, inflation was at 4.6%, easing from the 4.9% in September, mainly due to a slower increase in food prices.

The decline in oil prices after China released some of its petroleum reserves also affected yield movements last week, Bank of the Philippine Islands Chief Market Strategist Marco Miguel Javier said in a Viber message.

“We’re on the lookout for clues from US Federal Reserve officials on any plans to accelerate the tapering of asset purchases amidst US inflation at a 31-year high,” Mr. Javier said.

Fed Vice Chair Richard Clarida said they might discuss increasing the pace of the tapering at their December meeting, Reuters reported Saturday.

“For the week, government securities yields are expected to move just sideways and possibly with slight upward bias as some may take the chance to lighten up their holdings and take profit,” the trader said.

The trader said the market is waiting for an announcement from US President Joseph R. Biden regarding the successor of Fed Chairman Jerome H. Powell. He added the market will also continue to look at the demand for the RTBs and how it will affect bond supply. — Luz Wendy T. Noble with Reuters