Yields go down as Fed resumes its easing cycle

YIELDS on government securities (GS) traded at the secondary market went down across all tenors last week as the market priced in the US Federal Reserve's first rate cut for this year and expectations of further easing amid signs of weakness in the world's largest economy.

- Pierce Oel A. Montalvo Researcher

GS yields, which move opposite to prices, declined by an average of 3.26 basis points (bps) week on week, according to data from the PHP Bloomberg Valuation System Reference Rates as of Sept. 19 published on the Philippine Dealing System's website.

Yields dropped across the board. At the short end of the curve, yields on the 91-, 182-, and 364-day Treasury bills (T-bills) slid by 14.38 bps (to 4.9458%), 1.67 bps (5.1976%), and 4.90 bps (5.3041%), respectively.

At the belly, the rates of the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) went down by 4.18 bps (to 5.5559%), 2.69 bps (5.6533%), 2.28 bps (5.7301%), 2.19 bps (5.7912%), and 2.06 bps (5.8705%), respectively.

At the long end, yields on the 10-, 20-, and 25-year bonds fell by 0.62 bp (to 5.964%), 0.48 bp (6.3445%), and 0.46 bp (6.3445%), respectively.

GS volume traded declined to P43.82 billion on Friday from P46.9 billion the week prior.

Lodevico M. Ulpo, Jr., vice-president and head of fixed-income strategies at ATRAM Trust Corp., said the local market was “broadly constructive” heading into the Fed’s two-day meeting last week.

“Positioning reflected investor confidence that the anticipated rate cut would reinforce the case for extending into the belly of the curve,” Mr. Ulpo said in a Viber message.

“The Fed’s tone has shifted meaningfully. While tariff-related inflation risks remain a watchpoint, the focus has pivoted toward supporting employment amid signs of labor market weakness.