Untitled Document
research

November 22, 2017 | MANILA, PHILIPPINES
Untitled Document
   yield tracker
Date posted: Tuesday, June 27, 2017 | Manila, Philippines

Yields on gov’t debt mixed

YIELDS on government securities (GS) ended mixed last week amid soft US data and as the Bangko Sentral ng Pilipinas (BSP) decided to keep borrowing rates steady.

On average, GS yields -- which move opposite to prices -- fell by 5.10 basis points (bps) week on week, data from the Philippine Dealing & Exchange Corp. as of June 23 showed.

“GS yields fell [last] week, as soft US data on housing starts and consumer sentiment raised doubts over the ability of the US Federal Reserve to hike interest rates as aggressively as its projections suggest,” said Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines (Landbank).

“These downbeat reports were aligned with [the previous] week’s soft US retail sales and inflation data. The drop in oil prices midweek also weighed down on GS yields, offsetting the impact of the generally hawkish statement of many US policy makers,” he added.

LOWER INFLATION PATH
For his part, Union Bank of the Philippines (Unionbank) chief economist Ruben Carlo O. Asuncion said: “The yields on government securities might have been lower due to the recent decision of the BSP to hold rates at the same time expecting that inflation will be lower than expected for 2017.”

“A probable no rate hike from the BSP might also have caused this decline,” Mr. Asuncion added.

According to a Reuters report, privately-owned housing starts in the US fell 5.5% to 1.09 million units, the lowest since September of last year.

On the other hand, the US consumer price index dipped 0.1% last month, while retail sales also fell 0.3% -- the largest drop since January 2016, Reuters reported.

Meanwhile, the BSP’s Monetary Board maintained borrowing rates unchanged for the 22nd straight time last week amid expectations of a “manageable” inflation.

Outgoing BSP Governor Amando M. Tetangco, Jr. even said that they now expect a “lower path of future inflation,” suggesting that the pace of price increases will soften compared to their previous forecasts.

The central bank trimmed their inflation estimate to a 3.1% average for the entire year, lower than the 3.4% it expected during their May 11 review. Prices of basic goods and services are also seen to pick up by 3% annually in 2018 and 2019, matching the midpoint of the central bank’s 2-4% target band.

At the secondary market on Friday, in the short end of the curve, yields on the 91-, and 182-day Treasury bills (T-bills) declined by 61.41 bps and 2.92 bps to 2.0663% and 2.2955%, respectively. Meanwhile, the 364-day paper gained 3.89 bps to yield 2.8463%.

In the belly, yields on the two-, three-, four-, and five-year Treasury bonds (T-bonds) went up by 8.38 bps (3.3638%), 0.32 bp (3.8375%), 2.19 bps (4.0148%), and 4.93 bps (4.0493%). On the other hand, the rate of the seven-year paper went down 0.26 bp to 4.4690%.

In the long end, the 10-, and 20-year bonds saw their yields decrease by 3.79 bps and 2.33 bps to 4.6033% and 5.3321%, respectively.

Sought for an outlook for this week, Landbank’s Mr. Dumalagan said: “[This] week, yields might move sideways, with a slight upward bias, amid conflicting US economic data. US reports on durable goods orders and consumer confidence might deteriorate, partly offsetting the impact of the likely upward revision of US first-quarter GDP (gross domestic product) growth.”

UnionBank’s Mr. Asuncion said: “I expect yields to be bouncing back [this] week with better news coming from US data and better leads.”

-----------------------------------------------------------------------------------------------------------
For inquiries, send e-mail to research@bworldonline.com

 
Other Stories