YIELD TRACKER

YIELDS ON government securities (GS) inched up last week due to muted trading amid a lack of fresh leads, with investors also awaiting the Bangko Sentral ng Pilipinas’ (BSP) maiden bond offering this Friday.

GS yields, which move opposite to prices, increased by 2.8 basis points (bps) on average week on week, PHP Bloomberg Valuation Service Reference Rates as of Sept. 11 published on the Philippine Dealing System’s website showed.

“Market remains generally moving sideways with an upward bias due to lack of catalyst,” a bond trader said in a Viber message last Friday.

“Yields saw directional trading throughout the week but we did note a general upward trend in yields as investors continue to look to possible issuances from the BTr (Bureau of the Treasury) and the effect on liquidity from future moves,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

“It was a relatively quiet week for the government debt securities market with low volume turnover. Market focus was on FXTN 03-25 auction…” UnionBank of the Philippines, Inc. said in a market report on Friday, referring to the fresh three-year bonds issued last week.

The BTr raised P30 billion via the fresh three-year papers it offered on Tuesday as rates declined. The bond fetched a coupon rate of 2.375% and an average rate of 2.279%. It settled at 2.38% at the end of trading on Tuesday.

Due to the strong demand for the papers, the Treasury opened its tap facility to raise another P15 billion from the tenor.

Except for 91-day debt, which dropped by 0.8 bp to 1.201%, yields climbed across-the-board at the end of trading last Friday.

The rates of the 182- and 364-day Treasury bills went up 3.5 bps and 2.1 bps, respectively, to 1.496% and 1.828%.

At the belly, yields on two-, three-, four-, five-, and seven-year bonds went up 0.8 bp, 2.2 bps, 1.7 bps, 2.5 bps, and 6.7 bps, respectively, to 2.171%, 2.376%, 2.531%, 2.662%, and 2.851%.

At the long end, rates on the 10-, 20-, and 25-year notes rose 6.2 bps, 5.2 bps, and 0.4 bp, respectively, to 2.938%, 3.724%, and 3.699%.

For this week’s trading, the market will monitor the BSP’s maiden offering 28-day securities on Sept. 18. The final offer volume will be confirmed on Sept. 16.

“Yields should take their cue from BSP’s maiden auction [this] week and we’ll see how that will affect trading in the weeks to come,” Mr. Mapa said.

“The banks’ accommodation of BSP’s bills may compel lower placements in the overnight deposit facility (ODF). Initial market indication is a BSP bill rate close to prevailing T-bill rates,” UnionBank said.

“Since the front end of the curve doesn’t offer any yield advantage over the ODF yield of 1.75%, we may see selling pressure in the front-end prior to the auction of BSP bills (portfolio diversification) instead of ODF withdrawals,” the report added. — A.O.A. Tirona

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