YIELD TRACKER

YIELDS on government securities (GS) inched upward last week amid a lack of catalysts in the local market.

Debt yields in the secondary market climbed 1.8 basis points (bps) on average week-on-week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates as of Oct. 30 published on the Philippine Dealing System’s website.

For the short-dated debt papers, the 91- and 364-day Treasury bills (T-bills) saw their yields go up by 1.6 bps and 1.3 bps to fetch 1.14% and 1.821%, respectively. Meanwhile, the yield on the 182-day T-bill edged down by 2 bps to 1.551%.

At the belly, the five- and seven-year Treasury bonds (T-bonds) saw their yields go up by 4.7 bps and 9.8 bps, respectively, to 2.75% and 2.938%.

On the other hand, the rates of the two- and three-year debt papers fell by 1.6 bps (2.071%) and 2.3 bps (2.325%), while those of four-year T-bonds remained unchanged at 2.557%.

For long-dated securities, the rates of the 10- and 20-year T-bonds went up by 4.8 bps (2.977%) and 3.8 bps (3.953%), respectively. The 25-year T-bonds, meanwhile, declined by 0.2 basis point to yield 3.915%.

“Yields have been trending higher over the last two weeks. Rather than a negative catalyst, it is the absence of positive catalysts driving the move,” said ATRAM Trust Corp. Head of Fixed Income Jose Miguel B. Liboro in an e-mail.

Security Bank Corp. First Vice-President and head of Wholesale Treasury Sales Carlyn Therese X. Dulay likewise attributed last week’s movement to the absence of downward catalysts, adding the upcoming US elections and a “possible sharp upward move” on US Treasuries on a potential sweep by the Democratic Party “is also taking a toll on short-term sentiment in local rates.”

“Barring outside factors, yields will most likely be trading sideways with slight upward bias [this] week. The high end of the five-year range is 2.90%, so any selling should be contained to that level,” Ms. Dulay said in an e-mail.

“However, should there be any drastic or unexpected results in the US elections, GS may follow whatever move [the US Treasuries] post,” she added.

For ATRAM Trust’s Mr. Liboro, a “further steepening” in the local yield curve is expected, albeit not necessarily sharp upward adjustments.

“Given that market positives of low inflation and a still-accommodative BSP have been largely priced in, peripheral factors such as the recent move higher in global bond yields, as well as a potential investor rotation back into local equities will likely cause a continued gradual adjustment higher in GS yields,” Mr. Liboro said.

“The T-bill and three-year [T-bond] auction [this] week will continue to generate decent demand at current levels, but we expect bids on the longer tenor (five years and higher) to become less aggressive and cause a continued gradual adjustment higher,” he added.

The Bureau of the Treasury made a full award of the P20 billion worth of T-bills auctioned off on Monday as the offer was more than four times oversubscribed, with bids amounting to P81.825 billion.

The Treasury also opened its tap facility window to raise another P5-billion each via the 182- and 364-day T-bills.

The government is planning to borrow some P140 billion from the domestic bond market in November. Of this total, P80 billion will be in T-bills and P60 billion will come from T-bonds. The auctions for T-bills will be held weekly, while the T-bonds will be offered fortnightly.

The government wants to borrow some P3 trillion this year from local and foreign lenders to help fund its budget deficit, which is expected to hit 9.6% of the country’s gross domestic product. — A.O.A. Tirona

RELATED ARTICLESMORE FROM AUTHOR