Yields on government debt end flat

YIELDS on government securities (GS) moved sideways last week on faster-than-expected August inflation data and after the government deferred its implementation of targeted lockdowns.

GS yields in the secondary market inched down by 0.54 basis point (bp) on average week on week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates as of Sept. 10 as published on the Philippine Dealing System’s website.

Yields on Treasury bills (T-bill) ended mixed last Friday. The rates of the 91- and 182-day papers fell by 0.26 bp and 0.99 bp to fetch 1.1453% and 1.4088%, respectively. On the other hand, the yield on the 364-day T-bill inched up by 0.72 bp to 1.6394%.

Meanwhile, the belly of the curve edged lower as yields on the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) fell by 2.14 bps (to 1.9527%), 2.16 bps (2.2656%), 2.43 bps (2.5816%), 2.54 bps (2.9233%) and 1.25 bps (3.581%), respectively.

Rates on the high end of the curve inched higher. The 10-year debt saw its yield rise by 0.47 bp to 4.1354%, while the 20-year paper climbed 1.96 bps to 4.9889%. The 25-year T-bond also added 2.68 bps to yield 4.9868%.

Security Bank Corp. Chief Investment Officer for Trust and Asset Management Group Noel S. Reyes said last week’s average yield movement was “small” as changes in rates were minimal due to data showing faster-than-expected inflation in August and as the government delayed its plan to implement granular lockdowns instead of region-wide quarantine measures to gradually reopen the economy.

A bond trader said last week’s yields ended firmer than the previous week even as the August inflation print was at higher end of the expected range.

“Market seemed to focus more on BSP’s (Bangko Sentral ng Pilipinas) post CPI (consumer price index) statements, where they mentioned that the policy stance will remain as long as economy remains fragile,” the bond trader said in a Viber message.

Rising food and utilities prices pushed August inflation to 4.9%, the fastest pace seen in more than two years. This was higher than the ����ý median estimate of 4.4% and was at the upper end of the central bank’s 4.1-4.9% estimate for the month.

Inflation averaged at 4.4% in the first eight months, beyond the BSP’s 2-4% target band and 4.1% forecast for this year.

The central bank last week said it will maintain its accommodative monetary stance “for as long as necessary” to support the economy as long as inflation stays within expectations.

Meanwhile, government officials on Sept. 7 said National Capital Region (NCR) will remain under modified enhanced community quarantine until Sept. 15, backtracking from an earlier decision to put NCR under general community quarantine to be accompanied by an alert level system.

For this week, the bond trader sees local yields moving sideways with a downward bias, especially for tenors of seven years and below, “while market will likely be cautious ahead of the 10-year auction.”

The Bureau of the Treasury will offer P35 billion in reissued 10-year papers with remaining life of nine years and 10 months on Tuesday.

Meanwhile, Mr. Reyes said yields will be range-bound this week as liquidity and movement could remain the same due to the lack of catalysts. — A.O.A. Tirona