Gov’t debt yields flat as prices quicken

YIELDS on government securities ended flat last week after inflation quickened in February.

The yields rose by 1.41 basis points (bps) on the average week on week, based on PHP Bloomberg Valuation Service Reference rates as of March 8 published on the Philippine Dealing System website.

The rates at the short end of the curve were mixed, with 91- and 182-day Treasury bills (T-bills) going up by 3.6 and 1.71 bps respectively, to 5.7652% and 5.9746%. The yield on the 364-day debt fell by 0.39 bp to 6.1049%.

At the belly of the curve, the rate of the two-year T-bond decreased by 0.46 bps to 6.1139%.

On the other hand, three-year bonds rose by 1.03 bps to 6.1612%, while      four-year bonds went up by 2.25 bps to 6.2040%.  Five-year bonds increased by 3.06 bps to 6.2360%, while seven-year debt gained 3.05 bps to 6.2632%.

At the long end, the 10-, 20-, and 25-year T-bonds marginally edged up by 0.93, 0.59 and 0.09 bps, respectively, to 6.2528%, 6.2555% and 6.2477%.

The volume rose to P14.13 billion on Friday from P11.25 billion on March 1.

“Local bonds saw weak trading action at the start of last week as investors were on a risk averse tone ahead of the inflation data released on Tuesday,” ATRAM Trust Corp. Chief Investment Officer Alessandra P. Araullo said in a Viber message. “Some sellers then emerged following the result, which spurred further de-risking.”

She added that inactivity persisted in the local bond space for the rest of the week absent any local catalyst.

In a Viber message, a bond trader said most bondtraders had expected faster inflation in February.

“However, what was surprising was the persistently higher month-on-month figure, with rice inflation continuing to be a concern although the core figure was lower,” the trader said. “This reminded the market that the Bangko Sentral ng Pilipinas (BSP) probably will not be cutting rates anytime soon particularly as the second-quarter consumer price index will likely be above the BSP’s upper target of 4%.”

February inflation quickened to 3.4% from 2.8% in January as food prices surged. Rice inflation increased to a 15-year high of 23.7% in from 22.6% in January and 2.2% a year ago.

On a monthly basis, prices of widely used goods and services went up by 0.6%. Seasonally adjusted, inflation climbed by 0.9% month on month.

Meanwhile, the government raised P30 billion from the reissued seven-year bonds it sold on Tuesday, according to the Bureau of the Treasury (BTr).

The bonds were awarded at an average rate of 6.27%, with accepted yields ranging from 6.198% to 6.345%.

“The market has ample liquidity to absorb the bond issuances, particularly with about P450 billion of maturing unswapped retail Treasury bonds maturing this week,” the bond trader said.

The auction this week will show the market’s appetite in the future.

“We are expecting a more active trading session this week,” Ms. Araullo said. “The BTr will be issuing 10-year bonds and we are expecting stronger demand for this tenor.”

On Tuesday, the Treasury will auction off reissued 10-year debt with a remaining life of nine years and 10 months worth P30 billion. The debt has a coupon rate of 6.25%. — Karis Kasarinlan Paolo D. Mendoza