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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Monday, July 10, 2017 | Manila, Philippines

Yields on gov’t debt mixed

YIELDS on government securities (GS) ended mixed last week, amid a lack of consensus from the US Federal Reserve on its plans to shrink its balance sheet and a surge in global rates.

Last week, GS yields rose by 4.08 basis points (bps) on average, data from the Philippine Dealing and Exchange Corp. as of July 7 showed.

Analysts attributed the limited yield movement to a lack of consensus among US policy makers on the timing of their plan to shrink the Fed’s balance sheet. Minutes of the June 13-14 US Federal Open Market Committee meeting released on July 6 showed some officials pushed for the process to start within the next few months, while others preferred starting later this year for more time to assess the economic outlook.

“GS yields generally increased [last] week due to hawkish speeches from various US monetary officials. Hints from the US Federal Reserve that it might start reducing its balance sheet as early as September also pushed yields higher,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), said: “The main external driver [of the movement of yields] has been the US Fed’s seemingly mixed view of prices, and of the unwinding of its balance sheet.”

Local inflation data released last week -- which showed the average rise in prices of goods easing to 2.8% in June from 3.1% -- did not affect yield movements much. However, rates of longer-termed securities increased, which UnionBank’s Mr. Asuncion said was due to the expectations of a continued slowdown in inflation for the rest of the year.

In the secondary market, the 91-day Treasury bill lost 66.58 bps to yield 2.1481%. The 182-day and 364-day papers, meanwhile, gained 55.18 bps and 0.11 bp respectively, to fetch 3.0133% and 3.2268%.

Yields on the two- and seven-year Treasury bonds (T-bond) declined respectively by 15.72 bps (3.7146%) and 10.46 bps (4.8125%). The rest of the papers in the belly saw gains, with the yield on the three-year bond rising 13.86 bps (4.0302%), the four-year bond by 11.13 bps (4.1434%), and the five-year bond by 47.03 bps (4.5039%).

At the long end, the 10-year debt paper gained 3.02 bps to fetch 4.6693% and the 20-year T-bond rose 3.26 bps to yield 5.117%.

This week, Carlene Therese X. Dulay, vice-president and head of institutional flows desk at Security Bank Corp., said yields are likely to stay within range or slightly higher following the release of US non-farm payrolls data. -- Patrizia Paola C. Marcelo

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