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Yields on gov’t papers flat amid increase in auctions

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Yield Tracker

YIELD 040918

By Jochebed B. Gonzales
Senior Researcher

YIELDS ended flat on thin trading amid an increased supply of securities as the national government began conducting twice-a-week auctions for its state borrowings.

Week-on-week, prices of government securities inched up as yields dipped by 0.78 basis point (bp) on the average, data from the Philippine Dealing and Exchange Corp. (PDEx) showed as of April 6.

“Volume [at the secondary market] was very low but at least on the positive side, we got a full award for the fixed income,” said Helen G. Oleta, Trust Trading Head at the Rizal Commercial Banking Corp. (RCBC).

She added, “I think the latest issuance for the three-year bond was near the high expectations of the market which was around 7.745%, meaning the BTr (Bureau of the Treasury) is accepting the fact that the yields are really moving upward. There’s so much supply coming in, somehow they have to adjust these levels and inflation numbers really are inching up.”

Carlyn Therese X. Dulay, Head of Institutional Sales at Security Bank Corp., said: “Government securities traded lower by 5-10 basis points average across the board on client demand from the short to belly and some light positioning from market participants.”

Daily traded volume at the fixed income market averaged P6.239 billion last week compared to P7.409 billion a week earlier, based on data from PDEx.

Meanwhile, the BTr accepted P3.265 billion out of P13.63 billion tenders it received from P15 billion programmed Treasury bill offering last April 2. It auctioned off P5-billion in 91-day, P4 billion in 182-day and P6 billion in 364-day papers but a partial award was only given for the three-month paper while rejecting all the bids for the longer tenors. The 91-day T-bill fetched an average yield of 3.191%, higher than the 2.995% quoted in the previous week’s auction.

The following day, the Treasury made a full award of its P10-billion offering of reissued three-year bonds which fetched an average rate of 4.632%, up from 4.25% received during its first issuance in January.

At the secondary market on Friday, the downward bias was offset by shorter-dated papers whose rates ended higher than their previous week’s closing.

The yield of the 20-year bond sharply fell by 64.05 bps to 6.5220%, followed by the yield of the seven-year Treasury bond which lost 28.04 bps to close at 6.4571%.

Yields on the three-, five- and 10-year T-bonds were also down by 7.19 bps, 7.95 bps and 5 bps, respectively, to 4.5379%, 5.1608% and 5.95%, while the rate of the two-year paper dipped by one bp to 4.1513%.

On the other hand, the rates of the 91-, 182- and 364-day Treasury bills respectively increased by 5.47 bps, 38.12 bps and 24.36 bps, fetching 3.1270%, 3.5875% and 3.3186%.

The four-year bond also saw its yield rise by 37.50 bps to 5.3929%.

This week, RCBC’s Ms. Oleta said market players will take its cue from US employment data which saw steady unemployment rate at 4.1% last month. On Friday night, the US Bureau of Labor Statistics reported 103,000 increase in non-farm payrolls (NFP), much lower than the 185,000 forecast by economists in a Bloomberg survey.

For Security Bank’s Ms. Dulay: “Expect range trading to continue depending on NFP print and US average earnings data, and on the result of Tuesday’s 7-51 FXTN (fixed rate Treasury note) auction which is expected to print between 5.75-6.00%.”

Tomorrow, the Treasury will offer P15 billion in T-bills — P5 billion in 91-day, P4 billion in 182-day and P6 billion in 364-day papers. On Wednesday, it will auction off P10-billion in fresh seven-year T-bonds.