YIELDS on government securities (GS) traded in the secondary market ended mixed last week before the Holy Week trading break.
GS yields, which move opposite to prices, inched down by an average of 0.73 basis point (bp) week on week, according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates as of April 16 published on the Philippine Dealing System’s website.
Philippine financial markets were closed on April 17-18 due to nonworking days in observance of Holy Week.
Rates at the short end of the curve closed mixed, with the 91- and 182-day Treasury bills (T-bills) increasing by 4.32 bps and 1.28 bps to fetch 5.4133% and 5.6308%, respectively. Meanwhile, the 364-day debt fell by 9.63 bps to yield 5.6841%.
At the belly, rates mostly ended lower, with the three-, four-, five, and seven-year Treasury bonds (T-bonds) declining by 0.13 bp (to 5.8084%), 1.81 bps (5.8684%), 3.49 bps (5.9425%), and 5.01 bps (6.1071%), respectively. On the other hand, the rate of the two-year bond rose by 1.47 bps to 5.7652%.
The long end of the curve went up as yields on 10-, 20-, and 25-year T-bonds climbed by 4.37 bps (to 6.3013%), 0.33 bp (6.3189%), and 0.28 bp (6.3184%), respectively.
GS volume traded was at P28.33 billion on April 16, lower than the P36.07 billion recorded on April 11.
“Last week’s bond trading was rather muted amid lack of major economic data drivers and increased liquidity requirements by market participants from the income tax deadline and ahead of potentially increased Holy Week cash demand,” the first bond trader said in an e-mail. “There was increased demand for bonds as investors sought less risky investments following the substantial volatility in equity markets.”
The second bond trader said the recent market volatility caused by global uncertainties due to the Trump administration’s tariff policies “somewhat settled down” last week.
“As global markets have settled down, local markets followed suit, which allowed the Bureau of the Treasury’s (BTr) auctions to proceed in a relatively orderly manner. The 10-year fixed-rate Treasury note (FXTN) auction [on Tuesday] helped give firm indications for current levels on the yield curve,” the second bond trader said in a Viber message.
“Last week’s BTr T-bill auctions were awarded with higher rates, reflecting expectations that the BSP (Bangko Sentral ng Pilipinas) is expected to hold its policy rates in its next policy meeting in June, while the benchmark 10-year Treasury bond also fetched yields higher than BVAL rates on lingering inflationary concerns,” the first trader added.
The BTr last week fully awarded its T-bill offer at mostly steady yields amid strong investor demand, raising P25 billion as planned as total bids reached P74.512 billion.
Meanwhile, the government raised an initial P135 billion from the new 10-year fixed-rate Treasury notes it auctioned off on Tuesday, more than four times the initial P30-billion offering, as tenders reached P197.3 billion.
The new 10-year bonds fetched a coupon rate of 6.375%, resulting in an average rate of 6.286%. Accepted yields ranged from 6% to 6.4%.
“Barring any surprises over our long weekend, we should expect the local market to continue to stabilize this week and shift some focus back to fundamentals that are geared towards a more favorable outlook for the local market,” the second trader said.
“Bond yields might continue declining from potentially dovish remarks by Federal Reserve Chair Jerome H. Powell and European Central Bank (ECB) President Christine Lagarde over the long weekend and market caution ahead of US economic data releases this week, which might provide initial indications about the health of the US economy,” the first trader added.
Mr. Powell said on Wednesday the Fed would wait for more data on the economy’s direction before changing interest rates, but cautioned that President Donald J. Trump’s tariff policies risked pushing inflation and employment further from the central bank’s goals, Reuters reported.
Mr. Powell, speaking for the first time since Mr. Trump paused some of the more stringent of his barrage of tariffs, also characterized the ensuing market volatility of recent weeks as a logical processing of the Trump administration’s dramatic shifts in trade policy — not a sign of stress that warranted a Fed response.
“For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” Mr. Powell said in a speech to the Economic Club of Chicago.
Meanwhile, the European Central Bank cut interest rates for the seventh time in a year on Thursday and warned that economic growth will take a big hit from US tariffs, bolstering bets for even more policy easing in the months ahead.
“Downside risks to economic growth have increased,” Ms. Lagarde told a press conference after policy makers agreed unanimously to cut the ECB’s benchmark rate by 25 basis points to 2.25%. “The major escalation in global trade tensions and associated uncertainties will likely lower euro area growth by dampening exports, and it may drive down investment and consumption.” — J.P.G.Villanueva with Reuters
