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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Tuesday, December 27, 2016 | Manila, Philippines

Debt yields end mixed

YIELDS on government securities (GS) ended mixed last week as market players stayed on the sidelines ahead of the Christmas holidays and after the Bangko Sentral ng Pilipinas kept monetary policy settings unchanged.

GS yields increased by 5.38 basis points (bps) on average last week, data from the Philippine Dealing & Exchange Corp. as of Dec. 23 showed.

Carlyn Therese X. Dulay, vice-president and head of institutional sales at Security Bank Corp., said: “The market stayed quiet most of the week with only sparse trading on liquid securities ahead of the Christmas holidays and after the Bangko Sentral ng Pilipinas (BSP) kept policy rates unchanged as expected in the last monetary board meeting of the year.”

During its policy meeting last week, the central bank kept interest rates steady amid the benign inflation environment and robust economic activity, while also taking into consideration the possible effect of the US Federal Reserve’s interest rate hike on global market conditions.

For his part, Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines (Landbank), said GS yields rose last week “as the upward revision of the US economy’s third-quarter expansion reinforced the possibility of three interest rate hikes next year by the US Federal Reserve.”

According to a Reuters report, the US economy expanded faster than initially reported amid robust consumer spending and surge in soybean exports. US gross domestic product grew by 3.5% in the third quarter, slightly faster than the 3.2% pace earlier reported for those three months. It was the fastest in two years since the third quarter of 2014.

Mr. Dumalagan added: “The hawkish comments of the US central bank during its December policy meeting continued to push GS yields higher in the first two days of the week, but the initial rise was temporarily trimmed on Wednesday and Thursday due to bargain hunting amid lack of fresh leads domestically and abroad.”

At the secondary market last Friday, government debt yields ended mixed. The yield on the three-year Treasury bond (T-bond) increased the most, rising by 50.53 bps to 4.1054%, followed by the four-year T-bond which saw its rate rise by 34.60 bps to 4.3107%.

Yields on the 91- and 364-day Treasury bills (T-bills) also rose by 27.98 bps and 14.49 bps to 1.7857% and 2.3103%, respectively. Likewise, the 10- and 20-year Treasuries gained 0.35 bps and 2.08 bps to fetch 5.0089% and 5.5529%.

On the other hand, the yield on the seven-year debt papers declined by 62.10 bps to 4.4076%.

Yields on 182-day T-bill and the five- and two-year bonds dropped by 7.59 bps, 5.07 bps and 1.43 bps to 2.0672%, 4.7979%, and 3.9750%, respectively.

For this week, Security Bank’s Ms. Dulay said she expects the market “to remain range bound with limited liquidity…as clients stay on the sidelines and prepare for the new year.”

On the other hand, Landbank’s Mr. Dumalagan said: “GS yields might drop due to bargain hunting and caution ahead of next year’s change in US government.”

He added that trading for the week might be sentiment-driven due to absence of market-moving leads from abroad.

“The possible drop in US treasury yields amid investors’ move to cover their short positions might also drag GS yields lower,” the economist added. • Christine Joyce S. Castañeda

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