Yield Tracker

By Christine J. S. Castañeda,

YIELDS on government securities (GS) traded in the secondary market went up last week amid expectations of another US rate hike this year.

On average, GS yields — which move opposite to prices — increased by 17.92 basis points (bps), data from the Philippine Dealing & Exchange Corp. as of Nov. 24 showed.

“Yields [last] week moved sideways with a bit of upward movement as FOMC (Federal Open Market Committee) minutes were released and were just what the market had expected,” Ruben Carlo O. Asuncion, UnionBank of the Philippines (UnionBank) chief economist, said.

“US Fed[eral Reserve] officials still indicated a rate hike by this December and most members supported continuation of gradual hikes, with some still showing concerns over tepid inflation. Total trading volume in the market was still minimal,” he added.

Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines (Landbank) shared the same view saying: “GS yields rose [last] week primarily because of US rate hike concerns.”

“The increase in yields, however, was capped by inflation issues noted in the FOMC minutes,” he added.

According to the minutes of the US central bank’s Oct.31-Nov.1 policy meeting, many Federal Reserve policy makers view that interest rates will have to be raised in the “near term.”

Also according to a Reuters report, policy makers see jobless rate to be too low for the inflation to maintain its weak level.

At the secondary market last Friday, in the short end of the curve, the 91-, and 182-day Treasury bills (T-bill) gained 79.36 bps and 35.63 bps to yield 3.0189% and 2.9648%. The yield on the 364-day T-bill also inched up by 41.86 bps to 3.4136%.

In the belly, the yield on the two-year Treasury bond (T-bond) went down by 24.57 bps to 4.3382%. Meanwhile, the rates of the three-, four-, five-, seven-year bonds increased by 48.71 bps (4.5589%), 8.04 bps (4.8250%), 16.46 bps (5.0825%) and 4.28 bps (5.3232%).

In the long end, the 10-year T-bond saw its yield increase by 5.47 bps to 5.5404%. The yields on the 20-year bond lost 36 bps to 5.2811%.

For this week, UnionBank’s Mr. Asuncion said: “[I]t is expected that there would still be muted activity in the GS market while players await more leads and also as the yearend nears.”

Landbank’s Mr. Dumalagan said: “GS yields are expected to increase [this] week, driven by likely strong US data on consumer confidence, 3Q GDP (gross domestic product) growth and core PCE (personal consumption expenditure) inflation.”