Mixed public debt returns on end-of-month positioning

Government bond (GS) yields were mixed last week following month-end positioning and ahead of the June inflation data release.

GS yields in the secondary market fell 1.39 basis points (bps) on average week-over-week, based on the PHP Bloomberg Valuation (BVAL) service benchmark rates as of July 2 posted on the Philippine Dealing System website.

The 91-day Treasury bill (T-bill) appreciated 0.60 bps for a yield of 1.1882%. At the same time, 182 and 364-day Treasury bill rates fell 0.52 bps (to 1.4121%) and 2.59 bps (1.6027%), respectively.

The belly of the curve ended mixed as the yield on two-year Treasury bonds (T-bond) rose 0.05 bps to 1.9567%. At the same time, three-, four-, five- and seven-year securities fell 2.06 basis points, 4.21 basis points, 5.59 basis points and 3.45 basis points, respectively, to reach 2.3381%, 2.6781%, 2.9828% and 3.4678%.

On the other hand, the rates on the longer tenors increased slightly. 10, 20 and 25 year T bonds saw their yields rise by 0.03 bps (to 3.8965%), 1.50 bps (4.9728%) and 0.94 bps (4.9689). %), respectively.

“[Last] week was characterized by consolidation due to month-end and first-half-year positioning to midweek as well as inflation talks that heat up in early July. ”Security Bank Corp . Chief Investment Officer Noel S. Reyes said in a Viber message.

One bond trader shared this point of view, adding “the yield bias towards the end of [last] the week was on the downside as dealers began to restore positions ahead of the CPI (consumer price index) release on Tuesday. “

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said last week that the central bank expects headline inflation for June to be between 3.9% and 4.7% for a one-time projection of 4.3%, with electricity and fuel costs remaining high. If achieved, June could mark the sixth consecutive month of inflation exceeding the 2% to 4% BSP target for the year.

Yield movements this week will depend primarily on the June inflation report released Tuesday, analysts said.

“We expect yields to move sideways with a bearish bias [this] week until we get some clarification on the direction of the CPI for the second half of 2021, ”the bond trader said.

Mr. Reyes said that the nextflProcurement data is “crucial” and will dictate the trend going forward.

“A strong CPI above 4.5% will trigger higher returns,” he said. – Ana Olivia A. Tirona

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