Yields on gov’t debt slip on increased demand

YIELDS ON government securities moved sideways last week on better-than-expected January inflation data and the central bank’s decision to keep rates steady.

GS yields — which move opposite to prices — slightly slipped by a week-on-week average of 1.6 basis points (bp), according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s Web site as of Feb. 8.

“Government securities yields were slightly lower [last] week on increased demand from end clients and market participants, who were emboldened by a better than expected inflation figure at 4.4% versus the 4.5% market consensus,” said Carlyn Therese X. Dulay, first vice-president and head of Institutional Sales at Security Bank.

“The slightly lower inflation print led to speculation that the reserve requirement cut would happen sooner rather than later,” she added.

Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila, said: “Decelerating inflation and BSP’s (Bangko Sentral ng Pilipinas) pause all helped push buying interest in the GS market.”

The increase in pricesofwidelyusedgoodscontinued to cool for the third straight month in January to 4.4% from 5.1% in December but faster than 3.4% in January 2018 due to slowing food costs.

The January result was better than the 4.5% median estimate in a BusinessWorld poll of 12 economists and analysts and within the BSP’s 4.3-5.1% forecast range for that month.

January’s inflation print was the slowest in 10 months or since the 4.3% pace recorded in March last year.

As widely expected, the BSP’s Monetary Board kept its policy rates steady for the second straight meeting last Thursday at 4.25-5.25% range.

The central bank also revised lower its inflation estimate this year to 3.1% from 3.2%, while it maintained three percent forecast for next year.