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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Monday, February 20, 2017 | Manila, Philippines

Yields up on Yellen speech

YIELDS on government securities (GS) moved up on average last week following hawkish comments from US Federal Reserve Chair Janet L. Yellen and as Treasury bills (T-bills) fetched higher rates across the board.

GS yields rose by 18.53 basis points (bps) on average week on week, data from the Philippine Dealing & Exchange Corp. as of Feb. 17 showed.

Carlyn Therese X. Dulay, vice-president and head of institutional sales at Security Bank Corp., said “yields for local government securities tracked US Treasury movement, with yields on the liquid 10-year moving around 10 basis points higher week on week, following higher rates fetched by T-bills across the board on Feb. 13 issuance which had limited demand.”

Last Monday, the Bureau of the Treasury partially awarded the T-bills it offered as investors sought yields that were higher than what the government was willing to pay.

The Treasury planned to raise as much as P15 billion worth of T-bills in 91-day, 182-day, and 364-day tenors during its auction of the shorter-termed papers last Feb. 13. However, it awarded only P10.36-billion worth of the papers, even as total bids reached P17.42 billion.

The 91-day T-bills were partially awarded at P4.295 billion versus the P6-billion program. The papers fetched an average rate of 2.252%. Similarly, the Treasury awarded only P3.57 billion of the 182-day debt papers against its P5-billion offer, with the accepted rates fetching a 2.467% average.

Lastly, the Treasury awarded just P2.495 billion in the one-year papers after total bids reached only P3.745 billion, less than the planned P4-billion borrowing, and the average yield hit 2.766%.

Union Bank of the Philippines (UnionBank) First Vice-President and Trust Group Head Robert B. Ramos said rates trended higher as Ms. Yellen, in a speech last week, kept open the possibility of a March 2017 interest rate hike.

Ms. Yellen noted in her speech on Tuesday that regulators may need to lift interest rates anew in their March 13-14 policy meeting as delaying the move could bring the Fed “behind the curve” and cause them to increase rates faster that would lead to a recession.

The US central bank also noted that they expect the US job market to remain robust and continue tightening as well as US inflation climbing to 2%.

“Basically, we followed US Fed Chair Yellen’s clear indications that rates will increase in March for the US. If the US rates hike, we will follow, but we have to find out to what extent,” Ms. Ramos said.

In the short end of the yield curve, the rate of the 364-day T-bills went down by 25.47 bps to 2.6646%. Meanwhile, yields on the 91- and 182-day papers went up by 11.78 bps to 2.2649% and by 47.68 bps to 2.9018%, respectively.

In the belly, yields on all tenors increased, with the two-, three-, four-, five- and seven-year Treasury bonds (T-bond) respectively gaining 18.10 bps (3.8864%), 7.36 bps (3.5478%), 79.58 bps (4.3357%), 9.24 bps (3.9297%) and 35.89 bps (4.7982%).

In the long end, the 10-year T-bonds added 11.10 bps to fetch 4.3471%, while the 20-year T-bond saw its yield go down by 10 bps to 5.2357%.

Moving forward, Security Bank’s Ms. Dulay said yields on government securities will likely continue to track US Treasuries.

Tomorrow’s five-year T-bond auction’s result may also affect yield movement, she said. --
Lourdes O. Pilar

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