Gov't debt yields mixed as US downgrade roils bond markets

YIELDS on government securities (GS) traded in the secondary market ended mixed last week as investors repositioned in the aftermath of Moody’s Ratings’ downgrade of the United States’ credit rating.

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GS yields, which move opposite to prices, rose by an average of 5.13 basis points (bps) week on week, based on the PHP Bloomberg Valuation Service Reference Rates as of May 23 published on the Philippine Dealing System’s website.

At the short end, yield movements were mixed. The rates of the 91and 182-day Treasury bills (T-bills) went down by 5.75 bps and 1.59 bps week on week to 5.4551% and 5.6098%, respectively. On the other hand, the 364-day T-bill rose by 4.02 bps to yield 5.7398%.

At the belly of the curve, the two-year Treasury bond (T-bond) fell by 0.5 bp to fetch 5.7521%. Meanwhile, yields on the three-, four-, fiveand seven-year bonds increased by 0.71 bp (to 5.7978%), 1.3 bps (5.8421%), 1.73 bps (5.8981%), and 3.57 bps (6.0421%), respectively.

At the long end, rates of the 10-, 20-, and 25-year T-bonds surged by 9.61 bps (to 6.2693%), 20.45 bps (6.4771%) and 22.86 bps (6.5016%), respectively.

GS volume traded amounted to P36.79 billion on Friday, lower than the P80.42 billion recorded a week prior.

“Local bonds traded on the back foot after US rates soared as Moody’s Ratings downgraded its credit rating one notch lower to “Aal” from “Aaa,” aligning with Fitch Ratings and S&P Global Ratings,” Dino Angelo C. Aquino, vice-president and head of fixed income at Security Bank Corp., said in an e-mail.