YIELDS on government securities (GS) fell in a “relief rally” last week on US President Donald J. Trump’s softer-than-expected stance on tariffs following his return to the White House.
GS yields, which move opposite to prices, went down by an average of 6.92 basis points (bps) week on week at the secondary market, according to the PHP Bloomberg Valuation Service Reference Rates as of Jan. 24 published on the Philippine Dealing System’s website.
Rates at the short end of the curve fell, with the 91-, 182-, and 364-day Treasury bills (T-bills) declining by 18.51 bps (to 5.3122%), 5.4 bps (5.5721%), and 4.87 bps (5.8467%) week on week, respectively.
At the belly, yields likewise went down across all tenors. The two-, three-, four-, five-, and seven-year Treasury bonds (T-bond) saw their rates decrease by 5.41 bps (to 5.8939%), 8.06 bps (5.9850%), 10.39 bps (6.0418%), 11.44 bps (6.0831%), and 11.48 bps (6.1568%), respectively.
The long end saw mixed yield movements. The rates of the 20- and 25-year T-bonds rose by 4.10 bps and 4.23 to 6.4341% and 6.4342%, respectively. Meanwhile, the 10-year bond fell by 8.81 bps to fetch 6.2452%.
GS volume traded reached P45.12 billion on Friday, higher than the P27.87 billion recorded a week earlier.
“Following a week of underperformance, the local bond market recovered some ground, mainly inspired by President Donald Trump’s less aggressive stance on tariffs. As market fears eased, market sentiment improved, resulting to a well-received 10-year auction and significant buying interest in the liquid parts of the curve,” ATRAM Trust Corp. Vice-President and Head of Fixed Income Strategies Lodevico M. Ulpo, Jr. said in a Viber message.
The market’s strength caused some profit taking, he said, noting that despite the defensive mood, local bonds remain in positive territory.
“By the latter part of the week, the market transitioned to a wait-and-see mode amidst the weakness in US Treasuries and ahead of [this] week’s key events, particularly the Bureau of the Treasury’s (BTr) three-year and 25-year auctions and the first Federal Reserve meeting for 2025,” he said.
Dino Angelo C. Aquino, vice-president and head of fixed income of Security Bank Corp., likewise said the market saw a “relief rally,” with most GS yields moving lower along with US Treasuries following Mr. Trump’s softer stance on tariffs.
The first week of Mr. Trump’s presidency has turned out to be less aggressive on the trade policy front than many in the markets had expected, Reuters reported.
In a Fox News interview, Mr. Trump said he would rather not use tariffs against China and that a phone call with Chinese President Xi Jinping the prior week was friendly.
Mr. Trump had earlier told the World Economic Forum in Davos, via video link from Washington, that he wanted the US-China trade relationship to be “fair.”
US Treasury yields, which have retreated from January’s highs as some of the worry about a renewed spike in inflation has faded, were steady on Friday.
The US 10-year Treasury yield edged lower to 4.6194%, below the prior week’s 14-month high of 4.809%.
Meanwhile, the BTr on Tuesday made a full award of its offer of reissued 10-year bonds amid strong demand, raising P30 billion as planned as total bids reached P93.32 billion or more than thrice the amount on offer.
The bonds, which have a remaining life of nine years and 14 days, were awarded at an average rate of 6.251%. Accepted yields ranged from 6.22% to 6.27%.
To take advantage of strong market appetite for the papers, the Treasury opened its tap facility window and accepted another P10 billion in bids.
For this week, Mr. Aquino said the market will continue to monitor US yield movements, especially with the Fed set to hold its first policy meeting on Jan. 28-29.
“Markets will continue to remain cautious of global market developments given the uncertainties with regards to Mr. Trump’s planned tariffs for Mexico and Canada effective Feb. 1. Players will likely remain defensive, but at the same time, opportunistic, given the attractive levels of yields,” he said.
Mr. Ulpo added that yields could move depending on the result of this week’s T-bond auction.
On Tuesday, the BTr is looking to raise P35 billion via two bond tenors. Broken down, it will offer P15 billion in reissued seven-year T-bonds with a remaining life of three years and two months, and P20 billion in new 25-year papers.
“On the global side, the US Federal Reserve will conduct its first Federal Open Market Committee meeting on Jan. 28-29 to provide insights regarding the future of monetary policy. Another critical factor to be considered includes the looming trade policies of US President Trump and how these will definitively impact global and domestic inflation,” Mr. Ulpo said.
“Looking ahead, yield consolidation will likely persist until further clarity from the Fed is attained, but investors will be more opportunistic in the upcoming bond auctions, especially for the 25-year security.” — Abigail Marie P. Yraola with Reuters
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