Yields on gov’t debt rise amid geopolitical risks

YIELDS on government securities (GS) ended slightly higher last week amid the continued rise in US Treasuries due to safe-haven demand amid the worsening conflict between Iran and Israel.

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However, the rise in yields was capped at the end of the week after the Bangko Sentral ng Pilipinas (BSP) delivered a second straight rate cut on Thursday while signaling further easing to support growth amid benign inflation and global uncertainties.

GS yields, which move opposite to prices, increased by an average of 3.81 basis points (bps) week on week, data from the Bloomberg Valuation Service Reference Rates as of June 20 published on the Philippine Dealing System's website showed.

Rates of all tenors rose except the 364-day Treasury bill (T-bill), which dropped by 0.74 bp to fetch 5.6842%.

At the short end, yields on 91and 182-day T-bills increased by 3.1 bps and 5.13 bps to 5.4714% and 5.6213%, respectively.

At the belly of the curve, the rates of the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) went up by 2.94 bps (to 5.7375%), 3.33 bps (5.8258%), 3.92 bps (5.9099%), 4.79 bps (5.9988%), and 6.45 bps (6.1857%), respectively.

Lastly, at the long end, the 10-, 20-, and 25-year debt papers climbed by 6.28 bps, 3.65 bps and 3.06 bps to yield 6.4131%, 6.6478%, and 6.6469%, respectively.

GS volume traded fell to P27.93 billion on Friday from the P33.32 billion traded a week prior.

"Government securities saw mixed movements [last] week... reflecting cautious sentiment," Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said in an e-mail.

"The BSP's 25-bp policy rate cut prompted a mild rally in longer-dated bonds as investors priced in easing inflation and slower growth. Market players shifted to mediumand long-term securities, expecting further monetary accommodation," Mr. Ravelas added.

Yields were mostly higher as the BSP's policy decision was mostly priced in already before the meeting, a bond trader said.