Yields rise after RTB sale
YIELDS on government securities ended higher on position taking following the government’s successful sale of retail Treasury bonds (RTBs) last week.
Bond yields, which move opposite to prices, rose by 20.89 basis points ( bps) on average week on week, data from the Philippine Dealing & Exchange Corp. as of April 7 showed.
Rates on government debt papers initially retreated after strong investor demand for the offer of three-year RTBs, which ran from March 28 to April 6. Still, yields closed higher last week ahead of the release of the US non-farm payrolls report on Friday night.
“Local government securities traded 9-10 basis points lower week on week after the successful issuance of the new three-year retail Treasury bond, which was awarded at 4.25% for P175 billion,” said Carlyn Therese X. Dulay, vice president and head of institutional sales at Security Bank Corp. “The huge demand and the capping of the total offering for the bond emboldened traders to take positions and end clients to recalibrate their portfolios to accommodate the new bond.”
At 4.25%, coupon rate of the three-year RTB was higher than the 3.5% fetched for the 10-year retail bonds during the last RTB sale in September 2016.
The amount raised by the government was also bigger this time at P175 billion compared to P100 billion raised last September.
The market saw good demand, a bond trader said, referring to the RTB public offer. However, volume traded was “very muted” last week, averaging around P7 billion to P8 billion a day.
“Most players are on the sidelines,” the trader said. “Inflation was expected and was not a driver [ last week]. The market just brushed it off.”
Consumer prices increased by 3.4% year-on-year on average in March, the Philippine Statistics Authority reported last week. Although last month’s inflation rate was the fastest in nearly two and a half years, it was still within the Bangko Sentral ng Pilipinas’ ( BSP) 2- 4% target band by for the year. Also last week, the Bureau of Labor Statistics reported that US job growth slowed down to 98,000, much lower than the expected 180,000. Nonetheless, unemployment rate was reduced to 4.5%, the lowest since peaking at 10% in October 2009.
At the secondary market on Friday, the yield two-year Treasury bond (T-bond) rose by 121.07 bps to close at 4.4607%.
It was followed by the 364-day Treasury bill (T-bill) whose yield increased 35.84 bps to 3.0292%.
Yields on the 182-day, four- and ten-year Treasuries also went up significantly, by 26.71 bps, 29.07 bps and 14.46 bps, respectively, to 2.6893%, 4.5407% and 5.200%.
The rates of the seven- and 20-year bonds respectively added 7.32 bps and 0.08 bp week on week to 5.1357% and 5.0310%.
Meanwhile, the 91-day T-bill, and the three- and five-year Tbonds saw their rates decline by 15.71 bps, 7.34 bps and 2.62 bps, respectively, ending with 2.8125%, 4.0254% and 4.2315%.
“Expect bond levels to take its cue from NFP (non-farm payrolls) though market might be quiet ahead of the Holy Week,” said Security Bank’s Ms. Dulay.
“The market will likely wait for developments abroad, monitoring the [Donald J.] Trump and Xi Jinping meeting, as well as developments on the US missile launch — which might rattle the market, if there are any more surprises,” the trader said.