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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Tuesday, January 03, 2017 | Manila, Philippines

Yields end 2016 mixed

YIELDS on government securities ended mixed on the last trading days of 2016 with players closed out their positions, with rates expected to continue to fall within a range this year as markets assess the effects of recent monetary policy actions by the Federal Open Market Committee (FOMC) and the Bank of Japan (BoJ).

Government debt yields increased by 8.38 basis points (bps) on average last week, data from the Philippine Dealing & Exchange Corp. as of Dec. 29 showed, as market players closed their portfolios ahead of the long holiday break and prepared for this year.

“Market stayed relatively quiet on the last week of 2016 as traders closed out positions for the year and prepared for the coming new year,” Carlyn Therese X. Dulay, vice-president and head of institutional sales at Security Bank Corp., said in an e-mail.

“Yields stayed sideways on limited activity though we saw more buyers on the illiquid long end as end clients re-calibrated positions slightly,” Ms. Dulay added.

Ruben Carlo O. Asuncion, chief economist of the Union Bank of the Philippines (UnionBank), for his part, said yields have been tracking the volatility in other financial markets amid continued uncertainty overseas following moves policy tweaks by big central banks.

During its two-day meeting last Dec. 14-15, the US Federal Reserve’s policy-setting FOMC unanimously decided to increase the federal funds rate as expected, the first tightening move since it raised rates in December 2015 after keeping rates at near-zero levels following the global financial crisis in 2008.

However, the US central bank hinted at two to three more rate hikes this year in the face of a stable economy despite US President-elect Donald J. Trump’s planned fiscal policies, which are deemed inflationary. 

Meanwhile, last Dec. 19, the Bank of Japan kept monetary policy steady and offered a brighter view of the economy, signalling its conviction that a weak yen and a rebound in overseas demand will heighten prospects for a solid recovery.

Last week, BoJ Governor Haruhiko Kuroda also defended the bank’s yield curve control policy, saying it had kept Japan’s long-term interest rates from joining the uptrend in global yields and was helping the economy overcome stagnation.

Back home, at the secondary market, rates on debt papers were mixed. At the short end of the curve, yields went up slightly, with the rate of the 182-day Treasury bill (T-bill) rising by 79.94 bps to 2.9464%. This was followed by the 91-day T-bill which gained 30.55 bps to yield 2.0755%, and the 364-day papers which rose 15.11 bps to fetch 2.4520%.

At the belly, yields on the three-, four-, five- and seven-year Treasury bonds (T-bonds) went down respectively by 28.54 bps (to 3.5170%), 5.37 bps (to 3.8814%), 7.35 bps (to 4.7426%) and 5.00 bps (4.8857%). Meanwhile, the yield on the two-year debt paper increased 3.90 bps to 3.8676%.

Lastly, at the long end of the curve, the 10-year T-bond saw its yield increase by 13.53 bps to 4.6281%, while the rate of the 20-year tenor went the opposite direction, decreasing by 13.00 bps to fetch 5.3771%.

UnionBank’s Mr. Asuncion said that looking forward, “it is hard to tell if this particular trend will continue because overall medium- to longer-term prospects for the Philippine economy are still positive.”

Still, local bond yields will likely continue to track US Treasuries, with uncertainty due to the new US government and tighter monetary conditions expected to hound markets, analysts said. • Lourdes O. Pilar

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