Government bond yields rise in September

Elijah Felice Rosales – The Filipino Star

August 29, 2021 | 00h00

MANILA, Philippines – Investors expect interest rates on government securities to rise next month due to the possibility of rising inflation, bond traders say.

Bond traders polled by The STAR said investors may seek higher yields from their purchases of treasury bills (T-bonds) and treasury bonds (T-bonds), as inflation is expected to rise for the remaining months of the year.

“The rate of inflation will dictate both rates and demand for government securities in September as investors anticipate higher commodity prices due to recent typhoons,” said one trader.

In addition, the trader warned that failure to prevent the resurgence of COVID-19 infections could also change auction patterns. The trader said investors, for their part, will keep an eye on safe-haven assets such as Treasuries until the spread of the Delta variant is contained.

“Investors will likely ask for a rate hike in September due to the risks at home and abroad caused by the pandemic. They will also adjust their day-to-day activities based on developments, ”the trader said.

Metro Manila is operating under modified enhanced community quarantine which has been extended until September 7.

The Treasury Office will auction 15 billion pesos in treasury bills on Tuesday and 35 billion pesos in reissued five-year treasury bonds on Wednesday.

Another trader said Treasury bill rates could move sideways next week, while Treasury bond yields could fall by at least 39.5 basis points.

“For Treasuries, we expect rates to move sideways like in previous auctions. For T bonds, we expect yields to be between 2.7% and 2.9%, ”the trader said.

Last week, rates on 91-day T-bills rose 1.1 basis points to 1.077%, while that on 182-day bills rose 0.1 basis point to 1.408%. In contrast, 364-day yields fell 0.5 basis point to 1.612%.

The reissued five-year T bonds, with a coupon of 3.375 percent, obtained a rate of 3.295% in the previous auction.

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