YIELDS moved sideways last week as market players positioned ahead of the government’s retail Treasury bonds (RTB) offering which begins today.

Prices slightly picked up as yields on government securities (GS) dropped by 7.96 basis points (bps) on average week on week, data from the Philippine Dealing & Exchange Corp. as of Nov. 17 showed.

“The GS market was very quiet mainly because of the RTB issuance on Monday. Everyone’s watching for the success of the five-year RTB, initially at P30 billion,” said Helen G. Oleta, head of trust trading at Rizal Commercial Banking Corp. (RCBC).

For UnionBank of the Philippines (UnionBank) chief economist Ruben Carlo O. Asuncion: “Market activity was a little bit better as players returned from the holiday break coupled with the release of GDP (gross domestic product) data.”

“However, the market was quiet due to the annual convention of the Money Market Association of the Philippines (MART) [last] weekend. With the Bureau of the Treasury set to issue at least another P30 billion in bonds, anticipated added supply once again put upward pressure in yields,” he added.

Today, the Bureau of the Treasury will start offering P30 billion worth of five-year RTBs for a minimum denomination of P5,000.

Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank) also noted of the correction that prevailed in the market last week amid data releases that surpassed expectations of analysts.

“Yields fell initially amid news about a potential delay in the US tax reform and caution ahead of the Philippine 3Q GDP data and the US inflation report, which was then expected to show a weaker reading.”

“However, yields failed to rebound, despite better-than-expected US and Philippine data, likely because the upward movement in yields a week ago was overdone, resulting in some downward correction [last] week.”

The economy expanded 6.9% during the third quarter, the Philippine Statistics Authority reported on Thursday, beating 6.6% market forecasts. At end-September, GDP growth stood at 6.7%.

At the secondary market on Friday, the yield on the 91-day Treasury bill (T-bill) fell the sharpest, by 46.26 bps to close at 2.2253%. It was followed by the 182-day note whose yield declined by 40.97 bps to 2.6085%. Yields on the four- and five year Treasury bonds (T-bonds) also decreased by 22.43 bps and 20.10 bps, respectively, to 4.7446% and 4.9179%, while that of the 364-day debt paper shed by 6.68 bps to 2.9950%.

On the other hand, the yields of the two- and three-year treasuries gained 13.89 bps and 25.43 bps, respectively, to finish with 4.5839% and 4.0718%.

The seven-, 10- and 20-year bonds also saw their yields rose by 2.83 bps, 8.11 bps and 6.61 bps, respectively, to 5.2804%, 5.4857% and 5.6411%.

This week, analysts expect GS yields to continue trading sideways.

“The expectation is every time there is RTB, there is a lull in the local market usually for a week or two… in a sense that volume of trades will be minimal mainly because a lot of people will focus on the issuance of the BTr,” said RCBC’s Ms. Oleta.

For Landbank’s Mr. Dumalagan: “Yields might move sideways, although with an upward bias, as the FOMC (Federal Open Market Committee) minutes might continue to affirm views of another US interest rate hike in December.” — Jochebed B. Gonzales

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