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November 22, 2017 | MANILA, PHILIPPINES
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   yield tracker
Date posted: Monday, January 16, 2017 | Manila, Philippines

Yields on gov’t debt flat

YIELDS on government securities ended flat last week on cautious trading ahead of US President-elect Donald Trump’s inauguration on Jan. 20.

Bond yields, which move opposite to prices, slid by an average of 2.18 basis points (bps) week on week, data from the Philippine Dealing & Exchange Corp. as of Jan. 13 showed.

“Investors were generally cautious [last] week because of the forthcoming US presidential inauguration. They were generally more sensitive to news about the policy direction of the next US administration,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank).

“Yields fell [last] week, as US President-elect Donald Trump failed to provide more details about his proposed fiscal plans during his first press conference this year,” Mr. Dumalagan added. “The lack of clarity about his policy agenda triggered safe-haven buying on Wednesday and Thursday, dragging yields lower.”

A bond trader said players mainly tracked US Treasury yields but also took cues from the three-year bond auction held Jan. 10.

The auction of P15 billion worth of fresh three-year bonds -- the government’s first fund-raising exercise for the year -- was met with strong demand, leading the Bureau of the Treasury to open a tap facility on the following day to further accommodate investors. However, the tap facility did not attract any additional liquidity.

Asked on volume in the market last week, the bond trader said: “There were some days of stronger volume, like on Thursday when it was around P24.5 billion. Friday, however, was more subdued, with only P10.9 billion.”

At the secondary market on Friday, the yield on the 10-year Treasury bond (T-bond) lost 38.06 bps, finishing 4.3640%. It was followed by the 182-day and the five-year debt papers, whose rates dipped 3.39 bps and 5.18 bps, respectively, to 2.1768% and 4.5339%.

Other tenors that saw declines in yields were the three-, seven- and 20-year securities which shed 0.16 bp, 1.61 bps and 1.93 bps, respectively, to 3.3567%, 4.7196% and 5.2107%.

On the other hand, the yield on the 91-day Treasury bill (T-bill) gained 13.79 bps week on week to end with 2.0446%.

Yields on the 364-day T-bill and the two- and four-year T-bonds also increased by 7.09 bps, 4.29 bps and 3.32 bps, respectively, to 2.6959%, 3.6018% and 3.5488%.

“[This week], investors might remain watchful about developments concerning Mr. Trump’s future policy moves. Yields might rise, as expectations of upbeat US reports on inflation, industrial production, retail sales and consumer sentiment might reinforce views of three US interest rate hikes this year,” said Landbank’s Mr. Dumalagan.

“Trading activity might weaken as we near the US presidential inauguration due to increased caution among investors,” he added.

For Jonathan L. Ravelas, chief market strategist at BDO Unibank, Inc., players will wait for potential triggers enough to stir domestic yields.

Mr. Ravelas said yields will continue to move sideways to up on higher inflation expectations.

The Bangko Sentral ng Pilipinas sees inflation averaging 3.3% this year, faster than its previous 3% forecast but still within its 2-4% target band for 2017.

“Chances are interest rates could be trending higher as well,” Mr. Ravelas said. • Jochebed B. Gonzales

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