Yield Tracker

By Christine Joyce S. Castañeda
Senior Researcher

YIELDS ON government securities (GS) went down last week on lower inflation expectations and speculations of monetary easing.

On average, GS yields — which move opposite to prices — fell by 21.43 basis points (bp) week on week, according to the PHP Bloomberg Valuation Service Reference Rates as of March 29.

“The fall in yields were from the general speculation of monetary easing from the recent comments of a BSP (Bangko Sentral ng Pilipinas) official,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an email.

“Another reason may be the expected softer inflation print at [this] week’s release,” he added.

For his part, Nicholas Antonio T. Mapa, senior economist at ING Bank N.V.’s Manila Branch, said in an email that the continued decline in GS yields last week was brought by the “decelerating” inflation outlook and was in reaction to the Federal Reserve’s monetary policy decision amid expectations of easing from the US central bank.

“The second quarter borrowing program of BTr (Bureau of the Treasury) which was lowered also helped push yields down,” Mr. Mapa added.

Meanwhile, in a text message, a bond trader noted that last week’s decline mirrored the movement in bond yields globally.

BSP Governor Benjamin E. Diokno earlier said he sees room to ease key rates, while noting that the central bank will first have to monitor if the slowdown in the increase of prices will be sustained.

Meanwhile, in a memorandum posted on its Web site on Thursday, the Bureau of the Treasury said the government plans to borrow P315 billion domestically — P195 billion in Treasury bills (T-bill) and P120 billion worth of Treasury bonds (T-bond) — between April and June. The planned borrowing is lower than the P360 billion programmed in the first quarter and the P325-billion offering in the same period last year.

On the other hand, in its March 19-20 policy meeting, the Fed kept its rates unchanged, saying that they would keep interest rates steady this year.

At the close of trading on Friday, yields on the 91- and 182-day T-bills went up by 4.8 bps and 1.9 bps, respectively, to close at 5.799% and 5.94%. The 364-day T-bill also increased by 1.6 bps to yield 6.097%.

At the belly of the curve, the two-, three- and four-year debt papers were quoted at 5.822%, 5.748%, and 5.679%, respectively, which were 22.7 bps, 27.4 bps, and 32.4 bps lower than the rates seen the previous week. Yields on the five- and seven-year T-bonds also fell by 36.4 bps and 38.2 bps, respectively, to 5.627% and 5.599%.

Yields on the 10-, 20-, and 25-year bonds likewise went down 35.9 bps (5.605%), 28.5 bps (5.819%) and 22.5 bps (6.095%).

For this week, Mr. Mapa said: “Market will take their cue from inflation reported on Friday for direction and comments from BSP on RRR (reserve requirement ratio) and policy moves.”

For his part, UnionBank’s Mr. Asuncion said: “[This] week, yields are expected to be on the downward trend as the market expects a slower inflation print supporting more monetary policy space for the BSP.”

Meanwhile, the bond trader said: “[This] week, yields may rise a bit as investors may take profit ahead of CPI (consumer price index) data.”

March inflation data will be released by the Philippine Statistics Authority on April 5.