Connect with us

Hi, what are you looking for?

News

Gov’t debt yields rise on inflation, hawkish Fed

YIELDS on government securities (GS) rose last week following a slower but still elevated August inflation print and hawkish remarks from the US Federal Reserve chief.

GS yields, which move opposite to prices, went up by a week-on-week average of 24.91 basis points (bps), according to the PHP Bloomberg Valuation Service Reference Rates as of Sept. 9 published on the Philippine Dealing System’s website.

GS volume on Friday reached P12.402 billion, higher than the P10.298 billion recorded on Sept. 2.

Yields climbed nearly across the board last week, except for the 182-day Treasury bills (T-bills), which lost 3.08 bps to fetch 3.2996%.

The rates of the 91- and 364-day T-bills rose by 7.80 bps and 8.56 bps to 2.461% and 3.9767%, respectively.

The belly of the curve also went up as yields on the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) increased by 26.42 bps (5.0490%), 29.53 bps (5.3706%), 32.35 bps (5.7004%), 33.04 bps (5.9893%) and 31.83 bps (6.3341%).

Likewise, the rates of the 10-, 20-, and 25-year papers increased by 39.14 bps (6.6309%), 34.17 bps (6.9911%) and 34.28 bps (6.984%), respectively.

“Despite the slower-than-expected inflation pace in August, market participants are still concerned about it, as the print is still elevated and far off from the government’s target inflation range of 2-4%,” a bond trader said in a Viber message.

Preliminary data from the Philippine Statistics Authority showed headline inflation eased to a two-month low of 6.3% year on year in August from the near four-year high of 6.4% in July.

Still, this was faster than the 4.4% recorded in August 2021 and marked the fifth consecutive month that inflation went above the 2-4% target of Bangko Sentral ng Pilipinas (BSP).

In the first eight months of 2022, inflation averaged 4.9%, faster than the 4% a year ago. This is still below the BSP’s 5.4% full-year inflation forecast.

The bond trader added that continued hawkish comments from the Fed chief on their commitment to increase interest rates to temper surging inflation in the United States caused local yields to climb.

“Bond investors can’t help but be defensive and refrain from aggressively building up their bond positions given the foreseen rise in interest rates in the coming months,” the bond trader said.

Fed Chief Jerome H. Powell on Thursday said the US central bank is “strongly committed” to fighting inflation.

“We need to act now, forthrightly, strongly as we have been doing, and we need to keep at it until the job is done,” Mr. Powell said in a webcast interview Cato Institute President Peter Goettler.

The Fed will hold its next policy meeting on Sept. 20-21.

Security Bank Corp. Chief Investment Officer for Trust and Asset Management Group Noel S. Reyes said in an e-mail last week that yield movements were volatile last week after Mr. Powell said in a symposium held in Jackson Hole on Aug. 26 that rates will be higher for longer, which could cause other central banks to follow suit to reduce pressure on their respective currencies. 

“Market sentiment and direction of local yields were dictated by a steepening US curve as the 10-year US bellwether breached 3.3% on Wednesday from 3.2% to start the week despite safe haven demands,” UnionBank of the Philippines, Inc. (UnionBank) said in an e-mail.

UnionBank added that the local curve has steepened in the last two weeks due to the risk of hefty supply of government securities following the recent issuance of retail Treasury bonds as well as the Bureau of the Treasury’s (BTr) weekly auctions of debt papers.

For this week, the bond trader expects yields to see some upward pressure as the Fed’s and BSP’s policy meetings near. The BSP Monetary Board will meet on Sept. 22, a day after the Fed.

“Market will continue to adopt to its defensive stance and thereby may cause yields to higher in the near-term,” the bond trader said.

UnionBank said the local market will continue to track the two-year and 10-year US bellwether rates as markets position ahead of the release of US August inflation data and other economic reports before the Federal Open Market Committee meeting.

“As government debt supply risk starts to normalize and with likelihood of Philippine inflation peaking this month, bargain hunting may show up in the steeper segment of the local curve, particularly if US Treasuries do not overreact to US inflation data,” UnionBank said. — Lourdes O. Pilar

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

News

PHILIPPINE STAR/ MICHAEL VARCAS WASHINGTON D.C. — The United States is seeking to form a coalition of countries to drive negotiations on a global...

News

Buildings are seen along EDSA in Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN By Diego Gabriel C. Robles  THE WORLD BANK (WB) upgraded...

News

Heavy traffic is seen on the southbound lane of EDSA in Cubao, Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN THE PHILIPPINE auto industry’s...

News

REUTERS THE BANGKO SENTRAL ng Pilipinas (BSP) may deliver a second off-cycle rate hike in early November when the US Federal Reserve is expected...

News

Vendors arrange their goods at a public market in Manila. — PHILIPPINE STAR/ RUSSEL A. PALMA THE ASIAN Development Bank (ADB) is planning to...

Editor’s Pick

With the reversal of the 1.25% rise in National Insurance Contributions happening on the 6th of November, employers across the nation have an opportunity...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

KARASOLAR.COM TENA, Ecuador — Ecuador’s rainforest Achuar people say their ancestors long dreamed of a “fire canoe” or “electric fish” that would let them...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Disclaimer: Respect Investment.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 © 2022 Respect Investment. All Rights Reserved.