Connect with us

Hi, what are you looking for?

Economy

Yields on government debt increase

YIELDS ON government securities (GS) went up last week as inflation continued its uptrend to reach a 26-month high in February.

GS yields, which move opposite to prices, rose by an average of 12.92 basis points (bps) week on week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates as of March 5 published on the Philippine Dealing System’s website.

Yields on benchmark tenors increased on Friday from their Feb. 26 finish, except for those on the four-, five-, and seven-year Treasury bonds (T-bonds), which declined by 0.46 bp, 2.59 bps, and 0.25 bp, respectively, to 2.7486%, 3.0011%, and 3.4789%.

The largest increases were observed in the long end of the yield curve, particularly the 20- and 25-year T-bonds which saw their rates go up by 41.06 bps (to 4.8707%) and 55.84 bps (4.8716%), respectively. The yield on the 10-year debt paper also increased by 8.76 bps to 3.9806%.

Meanwhile, the two- and three-year T-bonds were quoted at 2.185% and 2.4865%,  respectively, rising by 6.99 bps and 3.29 bps.

The shorter termed Treasury bills (T-bills) likewise posted increases in their yields. This was led by the 364-day paper’s 12.79-bp increase to 1.6834%. The 91-day T-bills also rose by 8.54 bps (to 1.0816%) and the 182-day securities added 8.19 bps (1.195%).

“Yields inched up further as investors await the February inflation data which came out at 4.7%, broadly in line with estimates but still faster than the previous month… The recent uptick in prices put upward pressure on yields and effectively on the government’s borrowing cost,” First Metro Asset Management, Inc. (FAMI) said in an e-mail.

“Inflation erodes your real interest rate. As investors’ inflation expectations adjust higher, yields will continue to move higher in the secondary market as well,” ATRAM Trust Corp. Head of Fixed Income Jose Miguel B. Liboro said.

The 4.7% headline inflation rate in February marked the fifth straight month of acceleration in the rise in prices of goods, the Philippine Statistics Authority reported on Friday. The figure was also the fastest in 26 months or since the 5.1% rate in December 2018.

The February result was within the Bangko Sentral ng Pilipinas’ (BSP) forecast range of 4.3%-5.1% for the month. It brought the year-to-date inflation average to 4.5%, also higher than the BSP’s 2-4% target for the year.

BSP Governor Benjamin E. Diokno has said the rise in inflation was caused by supply side shocks and would not merit a monetary response “unless they lead to second-round effects.”

The BSP Monetary Board at its meeting on Feb. 11 kept key interest rates unchanged at record lows. Its next review will be on March 25.

The central bank last year slashed rates by a total of 200 bps to provide support to the virus-stricken economy. This brought down the overnight reverse repurchase, lending, and deposit rates to record lows of 2%, 2.5%, and 1.5%, respectively.

“While we saw some signs of stabilization on the belly (five- to seven-year T-bonds) of the yield curve towards the end of the week, we expect upward pressures to persist,” ATRAM Trust’s Mr. Liboro said.

Meanwhile, FAMI expects the market to “remain defensive and take directional cues” from this month’s T-bond auctions.

“The movements in the US Treasuries (USTs) will also influence sentiment in the local GS space. USTs continued to sell off as [US Federal Reserve Chair Jerome Powell’s] recent speech did not mention greater quantitative easing in response to the recent rise in Treasury yields. The US 10-year yield now hovers above 1.5%,” FAMI added.

The Treasury is looking to borrow P160 billion from the local market this month: P100 billion via weekly T-bill auctions and P60 billion in fortnightly offerings of T-bonds. It is offering seven- and 10-year bonds worth P30 billion each, scheduled to be auctioned off on March 9 and 23, respectively.

Meanwhile, Mr. Powell made his remarks at a virtual Wall Street Jobs Summit last Thursday (1:05 a.m. local time), which is likely his last public event before Fed officials meet on March 16-17. While his speech reiterated the intention to keep benchmark interest rates low until employment and inflation targets have been met, he made no mention of plans to keep US Treasuries from rising, leading these debt papers to increase further. — Ana Olivia A. Tirona

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Economy

THE SENATE on Monday ratified the Bicameral Conference Committee report on a measure that seeks to lower the minimum investment hurdle for foreign retailers...

Economy

The Philippines is one of 17 countries that have kept schools fully closed since the pandemic began, according to a report released by the...

Economy

Workers are busy cleaning in preparation for the restaurant’s reopening in Marikina City. — PHILIPPINE STAR/ MICHAEL VARCAS THE RESTAURANT industry is anticipating some...

Economy

EXCISE TAX collections from cigarettes jumped by 31% to P83 billion in the first seven months, with more than half coming from Philip Morris...

Investing

The world’s largest franchisor of home service brands, has announced the acquisition of Pimlico Plumbers, central London’s leading independent residential and commercial service and...

Economy

MEGAWORLD Corp. will be spending P40 billion to develop an eco-tourism township in Palawan in the next 10 to 15 years, Andrew L. Tan’s...

You May Also Like

Investing

Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...

Economy

Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...

Investing

As a traditionally rigid insurance industry becomes bogged down by antiquated processes and operations, a handful of industry leaders are seeking to shake things...

Economy

US President Joseph R. Biden, Jr., will rely on ally countries to supply the bulk of the metals needed to build electric vehicles and focus on...

Disclaimer: SmartRetirementReport.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.



Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!