Gov’t debt yields end flat

YIELDS ON government securities (GS) inched up last week following the Bureau of the Treasury (BTr) 10-year bond auction and the slow reopening of the economy.

Bond yields, which move opposite to prices, went up by an average of 2.3 basis points (bps) week on week, based on the PHP Bloomberg Valuation Service Reference Rates as of Oct. 23 published on the Philippine Dealing System’s website.

Rates on benchmark tenors were mixed across the curve. Yields on the short end dropped, with the 91-, 182-, and 364-day papers edging down 6.6 bps, 3 bps, and 0.4 bp, respectively, to 1.124%, 1.571%, and 1.808%.

At the belly, two-, three-, four-, five-, and seven-year notes increased 6.2 bps, 6.6 bps, 6.4 bps, 6.1 bps, and 5.6 bps, respectively, to yield 2.087%, 2.348%, 2.557%, 2.703%, and 2.840%.

Rates on the 10- and 25-year debt went up 5.6 bps and 0.8 bp to 2.929% and 3.917%, while the 20-year bonds slid 1 bp to fetch 3.915%.

“GS yields moved with a slight upward bias [last] week after the FXTN 10-60 was awarded on the high end of market expectations for the auction last Tuesday. This prompted a realignment of the curve at that tenor,” Justin Robert G. Labadan, senior trader at the Philippine Bank of Communications, said in an e-mail interview last week.

“With few surprises in terms of economic data, the supply-demand indicators such as auction results become more significant,” Mr. Labadan said. He was referring to the P30 billion raised by the Bureau of the Treasury from its auction of 10-year debt papers with a remaining life of four years and 10 months on Tuesday that attracted bids amounting to P68.664 billion.

The reissued notes fetched an average yield of 2.782%, down 40 bps from 3.182% fetched when these papers were last auctioned off on June 23, as investors remain liquid and amid market expectations of a benign inflation environment in the coming years.

“As long as economic data remain within expectations, I expect the auctions and other BTr related activities to weigh more on the movements in the coming weeks,” Mr. Labadan said.

Mr. Labadan also noted the gradual reopening of the Philippine economy as the government eased quarantine restrictions in several areas across the country.

“This should theoretically lead to more economic activity, essentially using up more of the excess cash lying around in the system,” he said.

First Metro Asset Management, Inc. (FAMI) said in a separate e-mail that GS yield action last week continued to be marginal as market players remained on the sidelines amid a lack of catalysts.

FAMI said the market is anticipating further easing from the Bangko Sentral ng Pilipinas (BSP), the BTr’s November borrowing schedule, and the October inflation print in the coming weeks.

“In the meantime, interest will be focused on shorter tenors while the rest of the curve is expected to move range bound…” as “local bond yields might succumb further to upward trend in US Treasury yields,” FAMI said.

Mr. Labadan said external or foreign factors have had little influence on the GS market in recent weeks and the upcoming US elections next month will be “interesting to see the swings in the US Treasury bond yields.”

“I expect yields [this] week to remain range bound as we’re looking at a relatively quiet week in terms of local economic data or even any local bond auctions.” he added. — Hernandez