YIELDS ON government securities (GS) ended flat last week amid the government’s ongoing retail Treasury bond (RTB) sale.

GS yields, which move opposite to prices, went down by a week-on-week average of 1.2 basis points (bps), based on the PHP Bloomberg Valuation Service Reference Rates as of July 30 published on the Philippine Dealing System’s website.

Local financial markets were closed on July 31 in observance of Eid’l Adha.

“Overall activity was muted this week as dealers focused on the ongoing RTBs issuances,” a bond trader said in an email.

“The anticipation of a short week, anticipation on the fate of the National Capital Region’s quarantine status and lack of catalyst gave traders more reason to stay on the sidelines,” added the bond trader.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion likewise attributed last week’s yield movements to two major movers: the continuing RTB offering and the Bureau of the Treasury’s (BTr) release of its August borrowing schedule.

“Activity was mixed with buying interest seen in the short-end of the curve, while belly bonds saw selling pressure as the BTr released its August borrowing schedule with bond offerings on the 10- and 20-year tenors. For the RTBs, the BTr is continuing to sell and it is estimated to be at P345 billion so far,” he said.

National Treasurer Rosalia V. de Leon said the government has already raised more than P310 billion via the five-year RTBs, which carry a coupon rate of 2.625%.

The Treasury also opened an exchange offer program for holders of old bonds for the new RTBs. The total amount of bonds eligible for swap is around P321 billion.

RTBs target small investors and are deemed as low-risk assets with relatively high returns. The RTB offer will run until Aug. 7.

Meanwhile, the BTr last week said it plans to raise P170 billion from the domestic market this month. This is 17% lower than the P205-billion borrowing plan for July but similar to the program in June and May.

At the short end of the yield curve, rates of the 91-, 182- and 364-day Treasury bills dropped by 7.2 bps, 0.7 bp, and 0.2 bp, respectively, to 1.429%, 1.606%, and 1.805%.

At the belly, yields on the three-, four-, five- and seven-year Treasury bonds fell one basis point (2.19%), 1.8 bps (2.319%), 2.1 bps (2.443%) and 4.1 bps (2.642%), respectively. On the other hand, the rate of the two-year T-bonds inched up by one basis point to 2.044%.

At the long end of the curve, the 10- and 20-year debt declined 8.2 bps (2.775%) and one basis point (3.532%), respectively. Meanwhile, the rate of the 25-year bond increased by 12.6 bps to fetch 3.883%.

Mr. Asuncion said key economic data to be released will affect yield movements this week.

“Buying interest may be seen in the short-end with COVID-19 (coronavirus disease 2019) impact-laden economic data releases. Belly and the longer-end may have selling pressures [this] week,” Mr. Asuncion added.

“[This] week, sideways movement can be expected until the CPI (consumer price index) data release,” the bond trader said.

The Philippine Statistics Authority is scheduled to report July inflation data on Aug. 5 and second-quarter gross domestic product data on Aug. 6. — Lourdes O. Pilar