Government debt yields rise

Government securities (GS) continued to sell off last week, pushing yields higher as investors turned cautious after Russia decided to invade Ukraine.

GS yields, which move opposite to prices, fell by a weekly average of 17.82 basis points (bps), according to PHP Bloomberg Valuation Service benchmark rates as of February 24 published on the Philippine Dealing website. System.

Local financial markets were closed on Friday in commemoration of the anniversary of the People Power Revolution.

Yields rose broadly in the secondary market on Thursday from their Feb. 18 close. At the short end of the curve, yields on 91, 182 and 364 day Treasury bills (treasury bills) rose by 16.05 basis points, 10.08 basis points and 4.5 basis points , respectively, at 0.9723%, 1.1639% and 1.5453%.

The belly of the curve similarly rose as rates on two-, three-, four-, five- and seven-year Treasury bills (Treasury bonds) climbed 37.48 basis points (to 3.0566% ), 32.09 basis points (3.7535%), 25.58 bps (4.3604%), 19.37 bps (4.8164%) and 9.59 bps (5.2529%), respectively.

On the long end, yields on 10, 20 and 25-year debt rose by 0.65 bp (to 5.4122%), 19.70 bp (5.6938%) and 20.97 bp (5.6992 %).

“Traders are looking at how the FOMC (Federal Open Market Committee) and US Treasuries (UST) will react to pressures from the CPI (consumer price index) given the risk aversion due to the invasion going on in Ukraine,” a bond trader said in a statement. Viber message Thursday.

The bond trader added that the Office of the Treasury (BTr) announcement of its March borrowing plan moved the market last week.

“Markets took a rout as mounting global inflationary pressures took over local drivers. (retail treasury bills) five-year added to the sale when it was announced,” Security Bank Corp. chief economist Robert Dan J. Roces said in an email.

Expectations of US Federal Reserve tightening by next month have weighed on economies around the world recently, with US inflation rising at its fastest pace in nearly four decades, at 7.5% per year in January.

Meanwhile, Russia’s invasion of Ukraine sent stock markets around the world tumbling on Thursday as prices for commodities such as oil rose, Reuters reported.

The dispute pushed Brent oil above $100 a barrel for the first time since 2014. Russia is the world’s second largest producer of crude oil.

Back in the country, the BTr announced last Tuesday its intention to borrow 250 billion pesos on the domestic debt market in March, an amount higher than the 200 billion pesos programmed in February.

Broken down, it aims to borrow 75 billion pesos in its weekly treasury bill auctions and 175 billion pesos through treasury bonds.

The government is tapping domestic and foreign lenders to help finance its budget deficit capped at 7.7% of the economy this year.

The Treasury raised an initial 120.76 billion pesos through its sale of five-year RTBs at its rate-fixing auction on February 15, more than four times the size of the 30-year issue. billion pesos. The market flocked to the bid, with total bids amounting to more than six times the bid at 183.44 billion pesos.

The RTBs, aimed at retail investors who want lower-risk, higher-return government-backed savings instruments, secured a coupon rate of 4.875%, higher than the 4.625% set for the same RTB in November last year. ‘last year.

The offer period runs from February 15 to 28 and the bonds will be settled on March 4.

This week, the bond trader expects continued upward pressure on rates, especially if Russian-Ukrainian news helps oil prices stay high as rising oil prices drive expectations higher of inflation.

“On the domestic side, we have the three-year auction on Tuesday, in addition to the current RTB and February CPI data which will be known on March 4,” the bond trader added.

The Treasury will on Tuesday offer new three-year paper worth 35 billion pesos.

Meanwhile, the Philippine Statistics Authority is expected to release February inflation data on March 4.

A Business world A poll of 15 economists last week revealed a median estimate for February inflation of 3.3%. This is higher than the 3% print in January but lower than the 4.2% print in February last year. — Lourdes O. Pilar with Reuters

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