Debt yields rise as war keeps market cautious - BusinessWorld Online

YIELDS on government securities (GS) traded at the secondary market ended higher last week, even as trading stayed cautious due to lingering uncertainty over developments in the Middle East.GS yields, which move opposite to prices, went up by an average of 6.33 basis points (bps) week on week, based on the PHP Bloomberg Valuation Service Reference Rates as of May 22 published on the Philippine Dealing System website.

At the short end of the curve, yields on 91-, 182-, and 364-day Treasury bills (T-bills) jumped by 14.52 bps, 16.79 bps and 3.94 bps week on week to 5.0563%, 5.4593 and 5.9534%, respectively.At the belly, rates also rose across the board, with the two-, three-, four-, five-, and seven-year Treasury bonds (T-bond) climbing by 16.46 bps (to 6.9359%), 9.84 bps (7.202%), 4.04 bps (7.3598%), 1.13 bps (7.454%) and 2.84 bps (7.595%), respectively.

At the long end, yields on the 20- and 25-year papers dropped by 6.34 bps and 6.74 bps week on week to end at 7.6806% and 7.6766%, respectively.Meanwhile, 10-year T-bond rose by 13.10 bps week on week to fetch 7.7461%. GS volume traded rose to P27.69 billion on Friday from P15.87 billion on May 15.

Alessandra P.Araullo, chief investment officer at ATRAM Trust Corp, said in a Viber message that the market was mostly muted last week as the United States and Iran continued to exchange threats, keeping traders cautious.

“Market participants remained defensive, with bid-offer spreads staying wide throughout the week.This cautious tone was further reinforced by the seven-year auction, where implied yields would have reached as high as 8.125% had the issue not been rejected, highlighting weak demand,” she said.

“As a result, secondary market yields drifted modestly higher, with liquidity conditions deteriorating further and bid-offer spreads widening compared to the previous week.” “Recent developments regarding possible closing of a deal between US and Iran pro...