Yields on government securities steady ahead of Fed
YIELDS on government securities ( GS) traded in the secondary market were flat last week amid anticipation of a Federal Reserve rate hike, US tax reform developments and the government’s retail Treasury bond offer results.
GS yields — which move opposite to prices — were down by 6.63 basis points ( bps) on average week on week, data from the Philippine Dealing & Exchange Corp. as of Dec. 8 showed.
Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines ( Landbank) said: “Yields fell [ last] week following a correction in the market after last week’s rise. The drop occurred even as investors continue to anticipate another US rate hike next week and despite positive developments on the US tax reform.”
Carlyn Therese X. Dulay, vicepresident and head of institutional sales at Security Bank Corp., said the Dec. 4 settlement of the retail Treasury bonds (RTB) affected GS yields last week.
“The large float temporarily caused some upward pressure on tight liquidity post settlement, along with mixed US data and optimism on the US tax legislation which was also reflected in the recent TDF ( term deposit facility) auction, which had marginally lower tenders,” she said.
A bond trader also attributed last week’s yield movement to “liquidity tightening because of the settlement of the new RTBs.”
The bond trader also noted the undersubscribed offerings for the Treasury and the term deposit facility by the Bangko Sentral ng Pilipinas because “most of the money — the excess liquidity — were settled in the RTBs.”
With a 51-49 result, Senate Republicans approved the bill which would slash corporate taxes to 20% from the current 35%. This would be the largest change to US taxation since the 1980s.
Meanwhile, the government raised P255.4 billion from its offer of RTBs. The Treasury said “strong public demand led the RTBs to be oversubscribed multiple times.”
The government set the initial offer at P30 billion. The Treasury issued P130 billion in RTBs during the auction, while P125.4-