Debt yields inch up amid profit taking

YIELDS on government securities (GS) rose slightly last week as the shortened trading period caused investors to pocket their gains and position before the year ended.

Rates, which move opposite to prices, went up by an average of 1.09 basis points (bps) week on week, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates as of Dec. 29 published on the Philippine Dealing System’s website.

Yields at the short end of the curve mostly went up last week, with rates of the 91- and 364-day Treasury bills (T-bills) rising by 8.59 bps and 4.56 bps to 5.2438% and 5.8674%, respectively. Meanwhile, the 182-day T-bill fell by 0.55 bp to yield 5.5178%.

At the belly of the curve, yields on the two-, three-, and fouryear Treasury bonds (T-bonds) declined by 1.83 bps (to 5.914%), 1.54 bps (5.9049%), and 0.49 bp (5.9144%), respectively. On the other hand, the rates of the fiveand seven-year T-bonds rose by 0.95 bp (to 5.9386%) and 3 bps (to 5.9892%), respectively.

Rates of tenors at the long end mostly went down. Yields on the 20- and 25-year debt papers declined by 3.8 bps (to 6.0821%) and 0.4 bp (6.1241%), respectively. Meanwhile, the 10-year T-bond saw its rate rise by 3.47 bps to 6.0012%.

Total GS volume traded on Friday fell to P14.06 billion from P22.51 billion on Dec. 22.

Yields were mostly mixed last week as buying flow was met with sellers taking profits on earlier positions, Security Bank Corp. Chief Investment Officer for Trust and Asset Management Group Noel S. Reyes said in an e-mail.

“Such activity led to a quiet pause ahead of the new year and a new year auction,” Mr. Reyes said.

While the Bangko Sentral ng Pilipinas (BSP) has not signaled when it will pause, the US Federal Reserve’s easing hints led to “a sold rally of long-dated tenors for both the dollar and peso government bonds, flattening both curves,” he added.

BSP Governor Eli M. Remolona, Jr. last month said the central bank is unlikely to deliver any benchmark interest rate cuts in the next few months and is leaning towards keeping borrowing costs higher for longer. — A.C. Abestano