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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Monday, January 09, 2017 | Manila, Philippines

Yields on gov’t debt down ahead of US payrolls data

YIELDS in the secondary debt market fell nearly across the board last week as market players sought to reposition following the holidays.

Yields on government debt fell 19.02 basis points (bps) on average week on week, data from the Philippine Dealing & Exchange Corp. as of Jan. 6 showed.

A bond trader said by phone that the decline was due to the positioning among investors following the New Year holidays.

Union Bank of the Philippines chief economist Ruben Carlo O. Asuncion said there was preference for shorter-termed instruments as market players are putting much weight of uncertainties on the longer-term instruments.

Sentiment was also affected by overseas developments as market players booked profits ahead of the release of data on US non-farm payrolls and other economic reports.

US employment increased less than expected in December but a rebound in wages pointed to sustained labor market momentum that sets up the economy for stronger growth and further interest rate increases from the Federal Reserve this year.

Non-farm payrolls rose by 156,000 jobs last month, the US Labor Department said on Friday. The gains, however, are more than sufficient to absorb new entrants into the labor market.

Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the work-age population.

The economy created 2.16 million jobs in 2016. Average hourly earnings increased 10 cents or 0.4% in December after slipping 0.1% in November. That pushed the year-on-year increase in earnings to 2.9%, the largest gain since June 2009, from 2.5% in November.

On the domestic front, headline inflation picked up to 2.6% in December 2016, the fastest pace since the 2.7% reading in December 2014. The full-year average clocked in at 1.8%, matching the Bangko Sentral ng Pilipinas’ (BSP) full-year forecast but still short of the official 2-4% target band. It was, however, higher than 2015’s 1.4%.

At the secondary market, rates were down almost across the board. The yield on the 182-day Treasury bill (T-bill) fell the most, declining 73.57 bps to 2.2107%. It was followed by the four-year Treasury bond (T-bond) whose yield went down 36.58 bps to 3.5156%.

Yields on the 91-day, two-, three-, five-, seven- and 20-year securities also dropped by 16.88 bps, 30.87 bps, 15.87 bps, 15.69 bps, 15 bps and 14.71 bps respectively, finishing with 1.9067%, 3.5589%, 3.3583%, 4.5857%, 4.7357% and 5.2300%.

On the other hand, the yield on the 364-day T-bill went up 17.30 bps to 2.6250%. The yields on the 10-year T-bond increased 11.65 bps to 4.7446%.

Sought for outlook for this week’s trading, a bond trader said that market players will be monitoring the Bureau of the Treasury’s first auction for the year.

The government will offer P15 billion worth of fresh three-year bonds at an auction tomorrow.

Unionbank’s Mr. Asuncion said: “Moving forward, the Philippine economic growth story remains intact and the economy, according to the BSP, can weather any external shocks due to long-term prudent and stable monetary and fiscal policies.” • Ranier Olson R. Reusora

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