Yields on government debt end higher

YIELDS on government securities (GS) mostly rose last week in a healthy correction from overbought conditions and amid market anticipation for fresh debt issuances and the US Federal Reserve’s next policy move.

GS yields, which move opposite to prices, went up by an average of 4.78 basis points (bps) week on week, according to PHP Bloomberg Valuation Service Reference Rates data as of Jan. 12 published on the Philippine Dealing System’s website.

Rates at the short end of the curve rose across the board. The 91-, 182-, and 364-day Treasury bills (T-bills) climbed by 11.05 bps (to 5.337%), 8.72 bps (5.5956%), and 14.6 bps (5.9734%), respectively.

At the belly, the three-, four-, five-, and seven-year Treasury bonds (Tbonds) rose by 2.78 bps (to 5.9679%), 4.63 bps (6.0237%), 5.68 bps (6.0756%), and 8.47 bps (6.1662%), respectively. Meanwhile, the twoyear bond fell by 0.09 bp to 5.9069%.

Yields at the long end were mixed. The rate of the 10-year debt paper rose by 11.97 bps to 6.2393%, while yields on the 20-, and 25year T-bonds fell by 7.43 bps (to 6.2464%) and 7.82 bps (6.2495%), respectively.

Total GS volume traded rose to P16.5 billion on Friday from P15.05 billion the week prior.

“Over the past weeks, we’ve observed a pronounced upward shift in yields, primarily driven by a market correction from previously overbought curve brought by the aggressive yield declines we saw last month,” Lodevico M. Ulpo, Jr., vice-president and head of Fixed Income Strategies at ATRAM Trust Corp., said in an e-mail.

The Fed’s previous indications of rate cuts this year pushed the market to overbought territory, he said.

“The recent auction of the five-year bonds, which was fully awarded at P30 billion and witnessed a robust demand (approximately 2.5 times oversubscribed), significantly influenced [last] week’s rates. The market’s response, especially considering the uncertainties surrounding the US consumer price index (CPI) and continuous new bond series issuance, continued to be firm with sporadic selling to reflect expectations on market pricing in the primary market,” Mr. Ulpo added.

Last week, the Bureau of the Treasury (BTr) raised P30 billion as planned from its offer of new five-year bonds as total bids reached P74.329 billion, more than twice as much as the program.