By Ranier Olson R. Reusora, Researcher

Yields on gov’t debt rise

Yield Tracker

Posted on May 09, 2016

YIELDS on government securities slightly moved up as investors stayed cautious most of the week waiting for the US jobs data and the upcoming local elections.

Week on week, yields went up by an average of just 1.91 basis points (bps), data from the Philippine Dealing and Exchange Corp. as of May 6 showed.

“Rates moved higher, reflecting cautious trading in a week that is headlined by the US non-farm payrolls (NFP) report and then the upcoming nationwide elections,” said Nicholas Antonio T. Mapa, associate economist at Bank of the Philippine Islands (BPI). “Data reports out from the US may point to an increased chance for a Fed rate hike, spooking market players.”

“Elections concerns also gripped bond markets with investors bracing for possible volatility should the election process see some bumps along the road,” he added.

For her part, Carlyn Therese X. Dulay, senior assistant vice-president and Head of Institutional Sales at Security Bank Corp., said: “Yields traded within a tight range this week as market players stayed sidelined ahead of NFP data due out Friday evening.

Ms. Dulay also noted the Treasury bills (T-bills) that were auctioned off and partially awarded at P17.802 billion out of the planned P20-billion issuance with the 91-day at 1.674%, 182-day at 1.65% and the 364-day at 2.099% earlier in the week, which Ms. Dulay said were all within market expectations.

In a report last Friday, Philippine Statistics Authority (PSA) said April headline inflation came in at 1.1%, well within the Bangko Sentral ng Pilipinas’ (BSP) estimate range of 0.7-1.5%, but below the 1.2% median in a BusinessWorld poll. The print brought the year-to-date average to 1.1%, well below the government’s 2-4% target and 2.1% forecast for the entire 2016.

For the local currency, peso rebounded last Friday against the greenback to end the week’s trading at P47.09 per dollar, 15 centavos stronger than its previous close of P47.24.

At the local debt market last Friday, yields on 182-day T-bills went up the most, increasing by 12.38 bps to fetch 2.1063%. It was followed by the 20- and 10-year Treasury bonds (T-bonds), whose rates respectively rose by 12 bps and 11.97 bps to fetch 5.3100% and 4.7017%.

Yields on the seven- and five-year T-bonds also went up by 6.53 bps and 2.66 bps to fetch 3.5992% and 3.4249%, respectively. Likewise, rates of three-, two-, and four-year T-bonds went up by 1.10 bps (3.7217%), 1 basis point (3.58%) and 0.42 basis point (3.0922%).

Meanwhile, yields on 364- and 91-day respectively went down by 27.73 bps and 1.20 bps to fetch 2.3900% and 1.9017%.

Sought for his outlook for this week’s trading, BPI’s Mr. Mapa said: “Yields will move sideways with an upward bias as traders react to the vote count and whether or not there will be some domestic disturbances and allegations of poll fraud.”

Mr. Mapa said the BSP policy meeting this week will also be on investors’ radar, as comments from the governor may affect sentiment.

For Security Bank’s Ms. Dulay, she said: “We expect yields to move sideways [this] week as market participants wait for firmer leads.”