Yields on gov’t debt end mostly higher

YIELDS on government securities (GS) mostly went up last week, tracking US Treasuries, as the market kept its defensive stance while waiting for the release of July Philippine inflation data.

GS yields, which move opposite to prices, went up by an average of 7.25 basis points (bps) week on week, according to the PHP Bloomberg Valuation Service Reference Rates as of Aug. 4 published on the Philippine Dealing System’s website.

Yields on the 91- and 364-day Treasury bills (T-bills) went up by 0.18 bp and 7.87 bps to 5.7015% and 6.1975%, respectively. On the other hand, the 182-day T-bill saw its rate drop by 1.13 bps to 5.9234%.

Rates at the belly rose, with the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) climbing by 4.46 bps (to 6.2513%), 4.8 bps (6.2931%), 5.51 bps (6.3221%), 6.89 bps (6.3494%), and 11.94 bps (6.4367%).

At the long end, yields on the 10-year paper surged by 20.71 bps to 6.5633%. The 20- and 25-year papers also climbed by 9.32 bps and 9.15 bps to 6.6977% and 6.6911%, respectively.

Total GS volume reached P10.77 billion on Friday, up from P9.52 billion on July 28.

The market tracked US Treasury yield movements ahead of the release of Philippine inflation data on Friday, a bond trader said in a Viber message.

Investors were defensive and “volume was relatively light, and most deals were suspected client requirements,” the trader said.

“On a normal day, market players would have celebrated the CPI (consumer price index) data which were better than expected. However, the increase in US Treasury yields may have pushed players on the sidelines and wait for US jobs data before deciding on next move,” the trader added.

Philippine headline inflation eased to 4.7% in July from 5.4% in June.

This was within the Bangko Sentral ng Pilipinas’ forecast range of 4.1%-4.9%. However, this remained above the target of 2-4%.

Meanwhile, bonds at the long end were affected by the US soft landing narrative, Fitch Ratings’ downgrade of the US’ credit rating, and the market “further digesting the implications of the recent move by the Bank of Japan towards a more flexible yield curve with higher yield tolerance,” Robinsons Bank Corp. Assistant Vice-President and Peso Fixed Income Trader Kevin S. Palma said in an e-mail.

“These factors did not bode well for local bonds, leading many market participants to remain defensive, especially in light of the sharp rise in long-end US Treasuries [last] week,” Mr. Palma said.

For this week, the market will track US Treasuries ahead of the release of the second- quarter gross domestic product (GDP) report on Thursday.

“Looking ahead, continued volatility is expected, particularly in anticipation of the release of Philippine second-quarter GDP data. Any movements in the local GS market will likely be highly contingent on the day-to-day performance of US Treasury yields,” Mr. Palma said. — Bernadette Therese M. Gadon with Reuters