YIELD TRACKER

YIELDS ON government securities (GS) were little changed last week as market players stayed on the sidelines ahead of the central bank’s maiden bond offering last Friday, with some investors tracking last week’s auction results.

GS yields increased by 6.6 basis points (bps) on average week on week, based on the PHP Bloomberg Valuation Service Reference Rates as of Sept. 18 published on the Philippine Dealing System’s website.

“The lack of fresh developments and a market still absorbing a likelihood that the BSP (Bangko Sentral ng Pilipinas) will keep its rates steady for the year triggered market players to trim positions and give up the bond market’s gains for a fourth straight week,” Robinsons Bank Corp. peso sovereign debt trader Kevin S. Palma said in a Viber message.

“Trades were centered mostly on the recently issued retail Treasury bonds (RTB) 05-13, where it rose up to the 2.90% level until bargain hunters put a lid to the uptick to finish the week lower to around 2.80% level,” he added.

ATRAM Trust Corp. Head of Fixed Income Jose Miguel B. Liboro said yields continued to adjust from year-low levels in August as investors continued to take profits moving into the fourth quarter.

“Selling pressure pushed the recent RTB 5-year (RTB 05-13) to trade at a discount as investors rebalanced portfolios and reduced risk,” Mr. Liboro said in an e-mail.

“Similar selling pressure was seen on the less liquid long-tenor (12-year to 20-year) portion of the yield curve before bargain hunters reinstated positions with yields 50-60 bps higher from lows hit in August,” he added.

In a market report, UnionBank of the Philippines, Inc. said short-term papers “moved sideways with an upward bias” ahead of the BSP’s maiden debt offer last Friday.

“As market participants opted to stay on the sides awaiting results of BSP’s first debt sale, trading volume eased,” UnionBank said.

The central bank made a full award of its maiden 28-day securities on Friday, raising P20 billion as planned as the papers fetched an average rate of 1.8355%. The offer was around 2.2 times oversubscribed, with total tenders reaching P43.360 billion.

Yields went up across-the-board at the secondary market last Friday. At the short end of the curve, yields on the 91-, 182-, and 364-day Treasury bills (T-bill) increased by 0.9 bp, 2.9 bps, and 0.4 bp, respectively, to 1.210%, 1.525%, and 1.832%.

At the belly, the rates of the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) climbed by 3 bps (2.201%), 6.2 bps (2.438%), 9.7 bps (2.628%), 11.4 bps (2.776%), and 7.1 bps (2.922%), respectively.

At the long end, the yield on the 10-year debt paper increased by 5.8 bps to 2.996%. The rate on the 20-year bond also went up 9.8 bps to 3.822%, while that of the 25-year paper increased 15.5 bps to close at 3.854%.

“This week’s story will still be a tug of war battle between bear sellers and bargain hunters. Hence, very strong two-way interest may persist with some investors looking to put their excess liquidity into work in the GS market with some looking to trim positions as leads dry-up onshore,” Robinsons Bank’s Mr. Palma said.

“The local market may also take a cue from steepening pressures on US Treasuries,” UnionBank said in its report.

ATRAM Trust’s Mr. Liboro said investments will be watching this week’s auction of 10-year debt papers worth P30 billion “for clarity on short-term sentiment.”

“We anticipate decent demand for the security at the three-percent level and, given the recent adjustment higher in yields, expect yields to consolidate and drift gradually lower if it clears at that level,” he said. — Lourdes O. Pilar

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