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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Monday, February 27, 2017 | Manila, Philippines

Yields end mixed after dovish Fed meeting minutes

YIELDS on government securities (GS) ended mixed last week due to the dovish tone of the minutes of the US Federal Reserve’s Jan. 31 to Feb. 1 policy meeting.

GS yields -- which move opposite to prices -- went down by just 0.8 basis point (bp) on average week on week, data from the Philippine Dealing & Exchange Corp. as of Feb. 24 showed.

“Yields fell slightly [last] week due to offsetting economic signals from the US,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank).

“In the first three days of the week, yields climbed as a trend, driven by Fed Chair [Janet L.] Yellen’s hawkish comments...and optimism ahead of the tax plan of President [Donald J.] Trump,” Mr. Dumalagan added.

However, the initial increase in yields was eventually offset by the cautious tone of the Federal Open Market Committee (FOMC) minutes released last Wednesday.

“Federal Reserve officials highlighted the policy uncertainties under the Trump administration, but argued that another interest hike might be needed soon,” said Mr. Dumalagan.

Rates continued to fall last Friday, tracking US Treasury yields, after US Treasury Secretary Steven Mnuchin failed to give further details about the government’s tax plan.

Carlyn Therese X. Dulay, vice-president and head of institutional sales at Security Bank Corp., said: “The dovish Fed minutes emboldened market players and participants to bid lower but were met with sellers who were looking to take profit on dips.”

At the secondary market last week, the yield on four-year Treasury bond (T-bond) declined the most, shedding by 18.75 basis points (bps) to fetch 4.1482%. It was followed by the 364-day and two-year papers, which declined by 10.44 bps and 7.75 bps to fetch 2.5602% and 3.8089%, respectively.

The seven- and 10-year T-bonds also fell by 5.18 bps and 1.84 bps to fetch 4.7464% and 4.3287%, respectively.

On the other hand, the yield on the 91-day Treasury bill (T-bill) rose 16.19 bps to 2.4268%. It was followed by the three-year, 182-day, five-year, and 20-year papers, which respectively increased by 10.76 bps (to fetch 3.6554%), 5.18 bps (2.9536%), 4 bps (3.9697%), and 0.18 bp (5.2375%).

Sought for his outlook for this week’s trading, Mr. Dumalagan said GS yields might increase despite likely mixed US economic data due to expectations that Mr. Trump will provide more details about his tax plan during his Feb. 28 speech to a joint session of US Congress.

Security Bank’s Ms. Dulay said: “Expect market to trade sideways as they watch currency movement and wait for data in the US.” -- Ranier Olson R. Reusora
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