Government debt yields drop

YIELDS ON government securities (GS) fell last week following the strong result of the seven-year Treasury bond (T-bond) auction.

GS yields, which move opposite to prices, went down by an average of 5.46 basis points (bps) week on week, based on the PHP Bloomberg Valuation Service Reference Rates as of April 23 published on the Philippine Dealing System’s website.

“Local bond yields ended lower week on week following the turnout of BTr’s (Bureau of the Treasury) very strong seven-year auction,” Robinsons Bank Corp. peso sovereign debt trader Kevin S. Palma said in a Viber message last Friday.

“Strong market liquidity continued to take center stage, with GS benefitting from it given the dearth of investment outlets amid the current risk aversion,” he said.

“Economic growth concerns initially led to buying of government securities pushing yields to intra-week lows,” a bond trader said in a separate Viber message, adding that the prolonged strict lockdown in Metro Manila and surrounding provinces could spell economic losses and further dampen the country’s economic outlook.

“However, lack of further catalyst led to profit taking and as the market assesses BTr’s borrowing plan in the coming months,” the trader said.

The Treasury borrowed P35 billion as planned via its offering of fresh seven-year T-bonds on Tuesday. The papers fetched a coupon rate of 3.625%.

Investors swamped the auction, with tenders reaching P90.386 billion, prompting the BTr to open the tap facility to raise another P25 billion as it took advantage of the low rate quoted for the tenor. —