By Lourdes O. Pilar, Researcher
YIELDS on government securities (GS) declined across the board last week following strong demand for the Treasury’s dual-tenor bond offer and as the US Federal Reserve kept benchmark rates steady while signaling cautiousness moving forward.
Debt yields, which move opposite to prices, declined by an average of 8 basis points (bps) week on week at the secondary market, based on the PHP Bloomberg Valuation Service Reference Rates as of Jan. 31 published on the Philippine Dealing System’s website.
Rates fell across all benchmark tenors. At the short end of the curve, the 91-, 182-, and 364-day Treasury bills (T-bills) decreased by 3.36 bps (5.2786%), 5.02 bps (5.5219%), and 13.49 (5.7118%), respectively.
At the belly, the rates of the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) likewise declined 10.38 bps (5.7901%), 10.92 bps (5.8758%), 10.46 bps (5.9372%), 9.59 bps (5.9872%), and 7.37 bps (6.0831%), respectively.
Lastly, at the long end of the curve, the 10-, 20-, and 25-year papers went down by 1.64 bps, 5.39 bps and 10.41 bps to yield 6.2288%, 6.3802%, and 6.3301%, respectively.
GS volume traded decreased to P30.65 billion last week compared to P45.12 billion previously.
“Strong demand for the Bureau of the Treasury’s (BTr) dual-tranche issuance led local bond yields to decline by 3-12 basis points across the curve. The yield curve continued to bull steepen, with the front end outperforming for the week,” Alessandra P. Araullo, chief investment officer at ATRAM Trust Corp., said in a Viber message.
On Tuesday, the government raised P35 billion as planned via its dual-tranche T-bond offering as total bids reached P120.917 billion or over three times the amount placed on the auction block.
“In the broader context, offshore developments influenced the local government securities market as well. The US Federal Reserve maintained its policy rate but signaled a cautious approach to future rate cuts, citing that they are on a wait-and-see mode as they consider the effects of [US President Donald J.] Trump’s policies on inflation and the US economy. This tempered the rally in the local GS space, as investors reassessed their outlook in light of the US policy trajectory,” Ms. Araullo added.
The US central bank held interest rates steady on Wednesday and Federal Reserve Chair Jerome H. Powell said there would be no rush to cut them again until inflation and jobs data made it appropriate, Reuters reported.
Emerging from their first policy meeting during Mr. Trump’s second term in the White House, Mr. Powell said Fed officials are “waiting to see what policies are enacted” before judging the effects on inflation, employment and overall economic activity, with no reason to adjust rates further until data either show a renewed decline in inflation or rising risks to the jobs market.
For this week, GS yield movements would likely be driven by the release of January Philippine inflation data on Feb. 5 (Wednesday) as well as the BTr’s bond auction, Ms. Araullo said. On Tuesday, the government will offer reissued seven-year bonds with a remaining life of five years and five months.
“Rising domestic inflation expectations and the slow GDP (gross domestic product) growth would warrant sideways to down movement in the week ahead,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said in a Viber message.
A BusinessWorld poll of 16 analysts yielded a median estimate of 2.8% for the January consumer price index. If realized, this would be slower than 2.9% in December and match the 2.8% print in the same month a year ago. This would also be within the 2.5%-3.3% forecast of the Bangko Sentral ng Pilipinas for the month.
Meanwhile, Philippine GDP expanded by 5.6% in 2024, falling short of the government’s 6-6.5% target. — with Reuters
