Yields on gov’t debt sideways as market waits for retail bond issue
YIELDS ON government securities (GS) traded on the secondary market went sideways as traders anticipate the planned auction of new retail Treasury bonds.
On average, GS yields went down by 5.45 basis points (bp) week on week, according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates as of Feb. 15 published on the Philippine Dealing System’s website.
“Local benchmark interest rates mostly corrected slightly higher week-on-week, as part of a healthy correction partly due to planned new supply of government securities (retail Treasury bonds or RTBs),” said Michael L. Ricafort economist at the Rizal Commercial Banking Corp. (RCBC).
He added that yields went up slightly due to the “latest uptick in global oil prices to among the highest in more than two months; slightly weaker peso exchange rate; signals about no immediate easing in local monetary policy by way of a cut in local policy rates and/or a cut in large banks’ reserve
requirements ratio until inflation convincingly goes back to within the 2%-4% target.”
National Treasurer Rosalia V. De Leon told reporters last Monday that the market is anticipating a fresh issuance of RTBs given the Bureau of the Treasury’s (BTr’s) P70-billion worth of maturities on Feb. 19. However, she said the auction has yet to be confirmed as the government’s current cash position remains “very healthy.”
Meanwhile, Brent crude oil went up last Thursday, above $66 per barrel — its highest for the year — following supply cuts led by Organization of Petroleum Exporting Countries as well as the announcement of a higher-thanexpected cut by Saudi Arabia.
On the other hand, the peso declined further against the dollar last Friday to close at P52.43 against the dollar, weaker than Thursday’s P52.38-a-dollar.
Meanwhile, a bond trader agreed that yields moved sideways last week in anticipation of the RTB auction. “The market is just waiting. It looks like it’s only a matter of timing,” the trader said.
At the secondary market, trading closed on Friday with yields on most tenors up, except for the 10-year Treasury bond (T-bond), which yielded 6.31%, 1.5 bps lower than a week ago.
“The slight decline in the 10-year local interest rate benchmark may be partly due to the latest easing in the comparable 10-year US government bond yields, which recently hovered among one-year lows amid more dovish signals from the US Federal Reserve due to slower US/global economic growth prospects,” RCBC’s Mr. Ricafort said.
Meanwhile, Treasury bills (Tbills) climbed across the board. The one-year debt led the pack with a 17.9-bp increase to yield 6.12%, followed by the 182-day and 91-day T-bills’ 10.6-bp and 6.8-bp climb to 5.9% and 5.51%, respectively.
Bonds at the belly of the curve also went up. The two-year and three-year T-bonds were quoted at 6.02% and 6.03%, up 6.8 bps and 5.5 bps, respectively. The four-, five-, and seven-year Tbonds ended at 6.05%, 6.08%, and 6.20%, which were 4.4 bps, 3.5 bps and 1.5 bps higher than week-ago levels.
Yields on longer-term debt papers rose, with the 20- and 25year T-bonds closing at 6.65% and 6.71%, up 3.5 bps and 1 bp, respectively, from a week ago.
For this week, RCBC’s Mr. Ricafort said, “[L]ocal interest rate benchmarks could be mostly steady to slightly up especially if details firm up about the latest upcoming RTB issuance amid maturing government debt as this could fundamentally add to market supply of government securities.”
“However, prospects of easing/ lower trend in inflation could limit any further healthy upward correction in local interest rate benchmarks, especially if the peso remains relatively stable,” he noted.
Meanwhile, the bond trader said yields will continue to move sideways “with no clear bias as the fixed-rate Treasury note maturity may offset any pending RTB announcement.”