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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Monday, December 05, 2016 | Manila, Philippines

Yields on gov’t bonds fall

YIELDS on government securities fell last week amid thin trading, with market players tracking developments in the US despite an almost absolute chance of a rate hike this month.

Bond prices rose as yields declined by an average of 9.94 basis points (bps) week on week, according to data from the Philippine Dealing & Exchange Corp. as of Dec. 2.

However, the volume of bonds traded at the secondary market was thin according to analysts, with trades amounting less than P5 billion a day last week, except on Tuesday when it registered P11.8 billion.

“They are much thinner because people are staying defensive,” said Jonathan L. Ravelas, chief market strategist at BDO Unibank, Inc. said in a phone interview.

Mr. Ravelas said most of the demand came from the short end on expectations that interest rates will trend higher. “The market is reacting to movements which are external,” he added.

Moreover, the weakening of the peso against the dollar fueled expectations of a steeper inflation as well as domestic interest rates, he said.

A bond trader said by phone that players had risk-off stance ahead of the US non-farm payrolls data last Friday.

“There was a strong upward bias for yields. Volume was very limited. Players were mostly on the sidelines, in a wait-and-see mode,” he said.

Data from the US Bureau of Labor Statistics showed that non-farm payrolls increased by 178,000 in November bringing unemployment rate down to 4.6% from 4.9% in October.

At the secondary market on Friday, the yield on the 364-day Treasury bill (T-bill) shed as much as 81.52 bps from the previous week to 2.9027%. It was followed by the 10-year Treasury bond (T-bond) whose yield went down 32.71 bps to 4.5283%.

The yields on the 91-day, two-, three-, four-, and five-year securities also dropped by 13.85 bps, 19 bps, 13.84 bps, 3.81 bps and 11.6 bps, respectively, finishing with 1.5490%, 3.4798%, 3.7806%, 4.1635% and 4.8786%.

On the other hand, the yield on the seven-year T-bond went up 74.59 bps to 5.1125%.

The yields on the 182-day and 20-year notes increased by 1.97 bps and 0.36 bps, respectively, closing with 1.8393% and 5.6054%.

Mr. Ravelas said the market will take its cue from November inflation results due tomorrow. Looking forward, interest rates will continue to move sideways to up, he said.

The bond trader said the market is preparing for the Bureau of the Treasury’s T-bill and T-bond auctions scheduled on Monday and Tuesday, respectively.

“I’m seeing partial or rejected bids because of the risk-off sentiment. We might see investors bidding for higher rates but it might be too much for the BTr to accept,” the trader said.

The bond trader expects yields to rise by an average of 10 bps this week.

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