Yields drop ahead of break
YIELDS on government securities (GS) fell last week as they tracked US Treasuries and as market players positioned ahead of the long Lenten break.
On average, GS yields, which move opposite to prices, fell by 13.30 basis points ( bps) week on week, data from the Philippine Dealing & Exchange Corp. as of April 12 showed.
Local financial markets were closed on April 13-14 in observance of Maundy Thursday and Good Friday. “Yields on government securities ended slightly lower on the short- end and slightly higher on the long-end of the curve as traders realigned positions ahead of the long weekend
and of the new seven-year FXTN (fixed rate Treasury notes) issuance on April 18 with market consensus at 4.5-4.625%,” said Carlyn Therese X. Dulay, vicepresident and head of institutional sales at Security Bank Corp.
The government plans to raise as much as P15 billion in tomorrow’s auction of fresh seven-year Treasury bonds (T-bonds) that will mature on April 20, 2024.
For his part, Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines (Landbank), said: “GS yields fell [ last] week, tracking the drop in US interest rates, due to safe-haven buying amid geopolitical concerns in North Korea, Syria and France.
The US dollar turned lower along with Treasury yields and stocks on Wednesday after US President Donald J. Trump said the dollar is getting too strong and that he would prefer the Federal Reserve keep interest rates low.
US Treasury yields fell, with benchmark yields hitting a near five-month low due to Mr. Trump’s comments favoring low interest rates. Benchmark 10-year Treasury yields were 3 basis points lower at 2.268% after hitting 2.259%, which was the lowest since Nov. 17.
“Lower- than- expected nonfarm payrolls also weighed down on domestic interest rates,” Mr. Dumalagan added.
US nonfarm payrolls increased by 98,000 jobs last month, the fewest since last May.
On Wednesday, the last trading day before the Lenten break, in the short end of the curve, yields on the 91-, and 182-day Treasury bills (T-bills) were down by 87.33 bps and 45.29 bps to 2.2535% and 2.7050%, respectively, from a week prior. The rate of the 364-day paper rose 4.53 bps to 2.8460%.
In the belly, yields on the two-, four-, and sevenyear T-bonds slipped, respectively shedding 0.53 bps ( 4.4786%), 7.09 bps ( 4.1543%) and 6.04 bps (5.0557%). On the other hand, rates of the three-, and five-year bonds went up by 2.92 bps and 4.47 bps, fetching 4.0852% and 4.2687%, respectively.
In the long end, the 10-year T-bond saw its yield increase by 0.36 bps to 5.1679% while yield on the 20-year T-bond also went up by 1.01 bps to 5.0135%.
Sought for his outlook, Landbank’s Mr. Dumalagan said: “GS yields might show an upward bias [this] week, as likely firm US inflation in March 2017 keeps the US Federal Reserve on track to hiking rates two more times this year.”