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Gov’t debt yields end flat

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YIELDS ON government securities (GS) traded on the secondary market continued to move sideways as traders awaited the release of government’s planned borrowing program for the first quarter.

On average, GS yields inched up by 1.48 basis points (bp) week on week, according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates as of Dec. 28 published on the Philippine Dealing System’s website.

“The yields were flat last week as market participants were not expecting any market moving news/catalyst,” the First Metro Asset Management, Inc. (FAMI) said.

Traders also remained on the sidelines ahead of the release of the Bureau of the Treasury’s (BTr) borrowing program for the first quarter of 2019.

“So instead of placing/investing the money before the year ends, we expect the market participants to wait for this planned borrowing. There’s even a P70B bonds that will mature in February 2019 so expect more borrowings to refinance it,” said FAMI.

The government wants to shore up funds amounting to P360 billion during the first three months of 2019 — P240 billion via Treasury bills (T-bills) and P120 billion from the sale of Treasury bonds (T-bonds). For the whole year, the state plans to borrow a total of P1.89 trillion to fund its spending program.

“There were trades in the three-, five- and the 10-year papers but not that much to move the yields lower, as the market still expect two more rate hikes for the first half of 2019,” FAMI said.

At the secondary market, yields on the 91-day and 182-day T-bills fell 3.4 bps and 2.2 bps to end at 5.78% and 6.51%, respectively. Meanwhile, the 364-day paper’s rate rose 0.60 bp to 6.78%.

Bonds at the belly of the curve climbed except for the seven-year papers, which saw its yield drop 0.20 bp to 7.06%. The two-year and three-year T-bonds yielded 6.89% and 6.98%, up 4.80 bps and 3.6 bps, respectively. The four-year and five-year papers were quoted at 7.02% and 7.04%, respectively, also 2.1 bps and 0.80 bp higher than week-ago levels.

Longer-termed notes rose, with the 10-year and 20-year bonds ending at 7.07% and 7.49%, up 0.60 bp and 4.3 bps, respectively.

For this week’s trading, Jonathan L. Ravelas, chief market strategist at the BDO Unibank, Inc. said: “The prospect of steady to lower inflation should provide some potential to push yields down.”

He said with the trend in inflation tied up with the Monetary Board’s (MB) decision to keep rates unchanged, “probably next auction [yields will move] sideways to down.”

At its last meeting for 2018, the MB decided to halt its streak of rate hikes as it saw inflation moderating. Key policy rates were kept at a range of 4.25-5.25% as inflation eased to 6% in November from a nine-year high of 6.7% recorded in September and October. — Carmina Angelica V. Olano