YIELDS OF government securities (GS) barely moved last week following the start of the government’s retail Treasury bond (RTB) sale.

GS yields rose by an average of 0.6 basis point (bp) week on week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates published on the Philippine Dealing System’s website on July 24.

At the secondary market last Friday, the 91-, 182-, and 364-day Treasury bills (T-bills) saw their yields go down by 8.6 bps, 4.7 bps, and 3.1 bps, respectively, to 1.501%, 1.613%, and 1.807%.

At the belly of the yield curve, rates of the three-. four-, five-, and seven-year Treasury bonds (T-bonds) went up by 1.1 bps (2.2%), 4 bps (2.337%), 6.8 bps (2.464%), and 10.9 bps (2.683%). Only the two-year debt paper rallied as its rate fell by 1.4 bps to 2.034%

Yields on the 10- and 25-year T-bonds climbed by 13.5 bps (2.857%) and 1.5 bps (3.757%). Meanwhile, the rate of the 20-year paper fell by 13.9 bps to 3.542%.

“Local bonds remained locked in a very tight range on strong two-way demand week-on-week. Market players were observed to be occupied with book-building for the new five-year RTBs, that is why local bond yields just moved sideways across the curve,” Robinsons Bank Corp. Peso Sovereign Debt Trader Kevin S. Palma said in a Viber message.

“However, demand for short-dates remained strong given the elevated liquidity in the financial system,” he added.

Profit taking in some long-term tenors from record-low levels “may have been partly brought about by the new upcoming supply of government securities in view of the latest RTB issuance of at least P250 billion…,” said Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort.

“New and upcoming bond and equity issuances could have sapped some funds in the financial system towards these new fund-raising activities and away from existing issues, which thereby could have caused the recent bouts of healthy profit taking/downward correction,” he added.

The amount raised from the five-year RTBs already exceeded the record P310 billion borrowed via the three-year retail bond issue last February just a week into the offer period amid robust demand.

The government awarded an initial P192.71 billion of the five-year RTBs during the rate-setting auction on July 16. The P250-billion mark was breached after only four days.

The retail bonds carry a coupon of 2.625% and are being sold in denominations of P5,000 until Aug. 7, unless closed earlier by the Bureau of the Treasury (BTr).

The Treasury also opened an exchange offer program worth P321 billion for holders of the RTB 10-01, FXTN 05-73, RTB 10-02 and FXTN 07-57.

The retail bonds will be issued on Aug. 12 and will mature on Aug. 12, 2025.

“Local yields may continue to trade range-bound [this week]. Potential catalysts that could drive yield action… are the T-bill auction and BTr’s borrowing plan for the month of August,” Robinsons Bank’s Mr. Palma said.

The Treasury is holding a T-bill auction today.

RCBC’s Mr. Ricafort said major catalysts for this week include fund-raising activities such as the continuation of the RTB offering, the country’s first real estate investment trust (REIT) offering, and updates on quarantine measures by the government.

“Locally, any stricter quarantine measures could initially weigh sentiment on the local financial markets and could still cause continued profit-taking, in terms of a healthy upward correction in PHP BVAL yields as an immediate reaction, also amid new GS supply from relatively large RTB issuance,” Mr. Ricafort said.

BPI Capital Corp., the sole global coordinator and stabilizing agent for the REIT offering, told the Philippine Stock Exchange (PSE) last Wednesday that Ayala Land, Inc. will be offering REIT shares at P27 each, lower than the initial P30.05 per share indicated in the prospectus submitted to the PSE and the Securities and Exchange Commission.

The offer period will be from today to Aug. 3, with the listing at the PSE main board tentatively scheduled on Aug. 13. — Marissa Mae M. Ramos