Yields rise after January borrowing plan is released

Yields on government securities (GS) rose last week following the release of the government’s borrowing schedule in January.

Bond yields, which move opposite to price, rose on average 5.81 basis points (bps) week-on-week, based on benchmark rates from PHP Bloomberg valuation service as of December 24 published on the Philippines Dealing System website.

At the short end of the curve, the 91 and 182 day securities fell 1.49 bps and 6.79 bps to 1.1248% and 1.2645%, respectively. In contrast, 364 day paper rose 0.99 bp to 1.6638%.

The belly of the curve ended mixed as three, four, five and seven year bonds posted an increase of 3.89bp, 8.73bp, 14.20bp and 15.46bp to a yield of 3.2450%, 3.7411%, 4.1375%, and 4.5795%, respectively. At the same time, the two-year bond fell 0.01 bps to 2.6933%.

At the long end of the yield curve, 10-, 20- and 25-year Treasury bill rates rose 7.99 bps (to 4.9498%), 10.43 bps (to 5.0393% ) and 10.46 bp (at 5.0295%), respectively.

“Local bond yields rose after the release of the Treasury Bureau’s (BTr) borrowing schedule in January, where the expected volume is much higher than the current month,” a bond trader said in a Viber message. .

“The market also took inspiration from the rise in US Treasury yields week over week on renewed optimism that the US economy will be able to weather the threat brought by the Omicron variant,” added the bond trader.

Another trader said in a text message that activity in the GS market was relatively subdued last week, but has been on an uptrend since the January borrowing schedule was released.

The treasury plans to borrow 200 billion pesos locally in January – 60 billion pesos in treasury bills and 140 billion pesos in treasury bonds – reverting to a regular borrowing plan after a reduced supply of 70 billion pesos in December.

For this week, the No.2 bond trader expects yields to move “sideways with an upward bias” as the market will be looking for clear leads by the end of the year.

“Dealers and investors alike will always be on the defensive to wait for new leads as the year draws to a close,” the leading trader said.

The prospect of a US Fed tightening could put some pressure on the short end of the bond market, flattening the US yield curve, the trader said.

Locally, “the market is still very liquid and investors are always looking to put their money in place, which helps moderate the rise in local yields,” added the trader.

Following its two-day meeting on December 15, the US Federal Reserve announced that it would end its bond purchases in March of next year and signaled three rate hikes in 2022 to temper soaring inflation.

“We might expect upward pressure on yields as the Fed declines, but this could be tempered if the domestic CPI (consumer price index) moves below 4%,” he said. declared the second operator.

The Bangko Sentral ng Pilipinas raised its inflation forecast this year to 4.4% from 4.3%, already exceeding its target inflation range of 2-4%. Inflation forecasts were also raised to 3.4% for next year (from 3.3% previously), while the central bank maintained its projection of 3.2% for 2023. – Mariedel Irish U. Catilogo

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