Yields on gov’t debt climb on US Treasuries, Fed bets

YIELDS on government securities (GS) climbed last week to track movements in US Treasuries, as well as increased expectations of a Federal Reserve rate hike due to the upbeat US January inflation print.

On average, GS yields — which move opposite to prices — were up by 13.76 basis points ( bps) week on week, data from the Philippine Dealing & Exchange Corp. as of Feb. 15 showed.

“GS yields rose [ last] week still because of US rate hike expectations, which were further bolstered by January’s better-thanexpected US inflation report,” Land Bank of the Philippines ( Landbank) market economist Guian Angelo S. Dumalagan said via e-mail.

Security Bank Corp. Head of Institutional Sales Carlyn Therese X. Dulay shared the same sentiment, saying “global yields continued to head north on better US CPI (Consumer Price Index) [ last] week,” while on the local front, Ms. Dulay said “yields caught up on fair pricing due to the unexpected January CPI print at 4%.”

Late last week, the US Bureau of Labor Statistics ( BLS) reported that CPI came in at 0.5% in January, higher than market expectations.

Meanwhile, a local bond trader interviewed last Thursday said “bonds tracked the move of US Treasuries with global interest rates rising on inflation concerns.”

“Higher [ US Treasury bonds] also put market participants on the defensive though bids may firm up [ this] week after the surprise Reserve Requirement Cut on Thursday,” Ms. Dulay said.

The Bangko Sentral ng Pilipinas (BSP) on Thursday announced an “operational” adjustment in the reserve requirement ratio, which was reduced by one