Government debt yields move sideways

YIELDS on government securities (GS) moved sideways last week following the result of a partially awarded 13-year bond and the lack of significant data to drive the demand for debt papers.

GS yields, which move opposite to prices, went up by a week-on-week average of 6.24 basis points (bps), based on the PHP Bloomberg Valuation Service Reference Rates as of April 20 published on the Philippine Dealing System’s website.

Total GS volume traded reached PHP 7.58 billion on Friday, picking up from PHP 7.44 billion on April 14.

Local financial markets were closed on April 21 in observance of Eid al Fitr.

“The 13-year bond auction partially awarded at 6.25% anchored sideways trading in local government bonds despite the recent volatility in global rates,” said ATRAM Trust Corp. Chief Investment Officer Alessandra P. Araullo in a Viber message.

“Market traders were subdued in chasing yield levels lower. Meanwhile, real money participants and end-users continue to provide an anchor on duration,” added Ms. Araullo.

The Bureau of the Treasury (BTr) raised just PHP 19.475 billion from the fresh 13-year bonds it offered on Tuesday, less than the PHP 25-billion program, even as total bids reached PHP 48.769 billion.

The bonds were awarded at a coupon rate of 6.25%. Accepted yields ranged from 6.1% to 6.35% for an average of 6.24%.

National Treasurer Rosalia V. de Leon said that BTr partially awarded the fresh 13-year bonds because they want to align rates with secondary market levels.

“No significant local data resulting to sideways move in yields with an upward bias,” the bond trader said in a separate Viber message.

The rates at the short end of the curve went up, with the rates of the 91-, 182- and 364-day Treasury bills increasing by 21.06 bps, 15.85 bps, and 14.77 bps, respectively, to 5.6480%, 5.9190%, and 6.1475%.

At the belly, the two-, three-, four-, and five-year Treasury bonds saw their yields climb by 6.90 bps (5.9589%), 6.14 bps (5.9337%), 4.38 bps (5.9291%), and 2.48 bps (5.9395%). Meanwhile, the rate of the seven-year bond decreased by 1.23 bps to fetch 6.0087%.

At the long end of the curve, the 10- and 20-year debt declined 1.63 bps (6.1687%) and 0.15 bp (6.4346%), respectively. Meanwhile, the rate of the 25-year bond increased by 0.02 bp to fetch 6.4350%.

“With PHP 180 billion of government bonds maturing, yields will likely remain capped on the upside,” Ms. Araullo said.

“A constructive view on the market should also be reinforced by Bangko Sentral ng Pilipinas (BSP)’s guidance for April inflation expectations, reaffirming potential pause of monetary policy hike next month,” added Ms. Araullo.

“Same move expected next week but will mostly take cues from global headlines,” a bond trader said.

The BSP last month hiked borrowing costs by 25 bps to help bring down elevated inflation, bringing the rate on its overnight reverse repurchase facility or its policy rate to 6.25%.

To contain surging inflation, the central bank has raised key interest rates by a total of 425 bps since May last year. The overnight reverse repurchase rate is now at 6.25%, while overnight lending and deposit rates are at 5.75% and 6.75%, respectively.

The Philippine Statistics Authority is scheduled to report April inflation data on May 5 and first-quarter gross domestic product data on May 11. — By Lourdes O. Pilar