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August 17, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Monday, April 24, 2017 | Manila, Philippines

Yields on gov’t debt rise

UNCERTAINTIES abroad sent local government securities (GS) yields up last week with investors in profit-taking mode ahead of key events.

During the week, GS yields went up 10.65 basis points (bps) on average, data from the Philippine Dealing & Exchange Corp. as of April 21 showed.

“GS yields increased [last] Monday due to profit taking, but erased their initial gain in the next three days because of safe-haven buying amid geopolitical concerns abroad...,” said Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines.

External uncertainties, he said, include yesterday’s French presidential election and renewed tensions between the US and North Korea.

“GS yields again recorded a net increase [last] Friday, as investors locked in the prior days’ price gain because of election uncertainty in France,” Mr. Dumalagan added.

Reuters reported that the US and South Korea -- with the cooperation of China -- forged a stronger alliance against North Korea as it persisted in conducting more nuclear and missile tests after it failed to launch last April 16.

US officials say that tougher sanctions could be imposed to put the clamps on Pyongyang’s activities.

Meanwhile, France’s presidential election put investors on edge, with the poll likely to test the country’s resolve to keep the European Union (EU) intact amid rising populist sentiments. The election featured two anti-Euro candidates out of the four seen still in contention to make it to round two of elections.

Profit taking was apparent in the upward movements of most tenors in the secondary market. In the short end of the yield curve, the 91-day Treasury bills (T-bills) saw its rate increase by 49.83 bps to fetch 2.7518%. The 364-day T-bills followed suit with a 16.11-bp increase (3.0071%) while the 182-day tenor inched down by 0.14 basis point to yield 2.7036%.

In the belly, yields on the three-, four-, and five-year debt papers went up respectively by 5.37 bps (4.1392%), 44.39 bps (4.5982%) and 2.24 bps (4.2911%). On the other hand, the two- and seven-year Treasury bonds (T-bonds) rallied as their yields went down by 10.9 bps (4.3696%) and 22.32 bps (4.8325%), respectively.

Papers at the long end saw yields move north, with the yield on the 10-year T-bond posting a 13.39-bp increase to 5.3018% and the 20-year debt papers gaining 8.52 bps to yield 5.0987%.

Mr. Dumalagan said GS yields “might decline anew” this week, with the first few days seeing continued safe-haven buying among investors following the results of the French presidential election.

“GS yields might also fall because of likely weak US durable goods orders. However, towards the end of the week, GS yields might partly trim its initial drop amid expectations of firm US GDP (gross domestic product) growth in the first quarter of 2017,” he said.

Mr. Dumalagan added that moves made by the Bank of Japan (BoJ) and the European Central Bank (ECB) are not expected to move markets this week as they might keep their respective monetary policies unchanged.

“Unexpected moves from these two banking regulators, however, could cause market volatility,” he said.

The BoJ and ECB will hold their respective monetary policy reviews on Thursday. -- Leo Jaymar G. Uy

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