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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Wednesday, January 11, 2017 | Manila, Philippines

Yields on gov’t debt drop amid US, Brexit concerns

YIELDS on government securities (GS) fell almost across the board last week following the failure of the US administration to pass a healthcare reform bill and amid concerns about the Brexit.

Debt yields fell by 29.8 basis points (bps) on average week on week, data from the Philippine Dealing & Exchange Corp. as of March 31 showed.

Land Bank of the Philippines (Landbank) market economist Guian Angelo S. Dumalagan said in an e-mail that “the failure of the Trump administration’s healthcare reform bill...dragged yields lower by raising concerns over the ability of the current US administration to implement its promised fiscal reforms.”

“Market participants, along with US policy makers, are monitoring the progress of these fiscal reforms, as they could affect the pace of US monetary tightening,” he said.

Meanwhile, the renewed Brexit concerns following Britain’s filing of a formal notice to leave the European Union” weighed down on yields by boosting demand for safer assets such as government securities,” Mr. Dumalagan said. “Brexit affected GS yields indirectly by dragging US interest rates lower.”

Despite the week-on-week decline in yields, domestic interest rates temporarily increased on Tuesday on the back of the results of the pricing auction for the government’s offer of three-year retail Treasury bonds (RTB).

The Bureau of the Treasury awarded P70-billion worth of retail bonds at that auction. The RTBs fetched a coupon rate of 4.25% and total tenders reached P86.172 billion, nearly three times the government’s original P30-billion offer.

At the secondary market, yields nearly fell across the board last Friday. The two-year Treasury bond (T-bond) fell the most, shedding 108.43 bps to fetch 3.25%. On the other hand, the lone gainer was the three-year T-bond which went up by 15.76 bps to fetch 4.0988%.

In the short end of the curve, yields on the 91-, 182- and 364-day Treasury bills fell, shedding 4.29 bps, 50.46 bps and 49.34 bps to fetch 2.9696%, 2.4222% and 2.6708%, respectively.

At the belly, the four-, five- and seven-year papers saw their rates fall by 8.09 bps, 3.23 bps and 13.96 bps to fetch 4.2500%, 4.2577% and 5.0625%, respectively.

Lastly, at the long end of the curve, the 10- and 20-year T-bonds saw their yields decrease by 24.82 bps to 5.0625%, and 50.73 bps to 5.0302%, respectively.

Mr. Dumalagan said GS yields may move sideways in the coming days “with a slight upward bias amid relatively balanced US data that still generally support views of more US hikes this year.”

Data on US personal consumption, expenditure, inflation and employment are both expected to remain strong, which would offset the likely weaker numbers on manufacturing and non-manufacturing, Mr. Dumalagan noted.

“[B]alanced FOMC (Federal Open Market Committee) minutes, which keep open the possibility of two more US rate hikes this year, could give GS yields a slightly upward trajectory, despite persistent concerns about Brexit and the elections in France and other European countries,” Mr. Dumalagan said.

Minutes of the FOMC’s March 14-15 meeting are scheduled to be released on Wednesday. -- Ranier Olson R. Reusora

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