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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Monday, February 13, 2017 | Manila, Philippines

Yields on gov’t debt steady

YIELDS on government securities (GS) moved sideways last week amid continued uncertainties in the global scene.

Last week, GS yields fell 0.64 basis point on average, data from the Philippine Dealing & Exchange Corp. as of Feb. 11 showed.

In the secondary market, rates on these debt papers were mixed. In the short end of the yield curve, the 182-day Treasury bills (T-bills) rallied, with rates going down by 11.25 basis points (bps) to fetch 2.4250%. Meanwhile, the 91- and 364-day debt papers saw their yields go up 12.79 bps (2.1471%) and 28.50 bps (2.9193%).

In the belly, yields on the two-, four- and five-year Treasury bonds (T-bonds) went down respectively by 1.07 bps (3.7054%), 7.49 bps (3.5399%) and 2.91 bps (3.8373%), offsetting yield increases seen in other tenors. The three- and seven-year T-bonds saw their yields go up by 5.27 bps (3.4742%) and 31.88 bps (4.4393%).

In the long end, the 10- and 20-year T-bonds rallied, with their rates going down by 53.53 bps (4.2361%) and 8.57 bps (5.3357%), respectively.

“GS yields generally moved sideways [last] week amid mixed signals from the US and political uncertainties in Europe,” said Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines.

“After rising modestly in the first two days of the week due to mixed US labor reports, GS yields fell on Wednesday, tracking US Treasury yields, because of heightened concerns over the forthcoming elections in various European countries... Political concerns in Europe somehow raised doubts about the stability of the European Union.”

The drop observed last Wednesday, Mr. Dumalagan said, was partly offset last Friday after rates on the debt papers surged “due to hopes that President [Donald J.] Trump would provide more details about his fiscal plans in the next few weeks.”

US jobs data released recently showed that the world’s largest economy added 227,000 jobs last month, surpassing economists’ predictions at 175,000. However, the unemployment rate inched up to 4.8% from 4.7% due to the increase of Americans considered now to be part of its labor force. Furthermore, wages grew just 0.1% -- a reversal of December’s 2.5% growth.

Meanwhile, Mr. Trump promised a “phenomenal” tax reform plan over the next two to three weeks during a meeting in the White House with airline executives.

On the other hand, in Europe, rising populist sentiments caused investors to keep their eyes on the elections in France, Germany and the Netherlands this year. First on the list would be Germany’s presidential elections, which was held yesterday -- followed by the Dutch general elections to be held in March; the French presidential and legislative elections in April and June, respectively; and the German federal elections in September.

This week, GS yields are expected to “decline further due to expectations of weaker US economic reports on retail sales, inflation and housing,” Mr. Dumalagan said.

“While political uncertainties in US and Europe might also weigh down on yields, expectations of more fiscal stimulus under the Trump administration might prevent any drastic plunge in domestic interest rates.”

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