MANILA, Philippines—Yields on Philippine debt paper are unlikely to go up and may even go down in the remainder of 2011 mainly due to the weak economies of the United States and Europe, slower growth in domestic output as well as a benign inflation outlook.
First Metro Investment Corp. and the University of Asia and the Pacific said in a joint research that they saw no upward pressure in the short- and long-term yields considering such global and domestic scenario, which warranted a decline in interest rates.
FMIC and UA&P see “the anemic world growth prospects” pushing inflation rates lower than earlier expectations.
The National Statistics Office reported that average inflation for January to September settled at 4.8 percent year on year, which was within the government’s target range of 3 to 5 percent.
FMIC and UA&P also projected the domestic economy to grow more than 5 percent in the third quarter.
“If [the Philippines] performs better than expected in the second half, the long-term trend in yield rates will continue to be downward,” the paper said.
“As long as the Philippines has the highest real rate, capital flows can be expected to come in the Philippines with liquidity further topping previous month levels,” it added.
Even then, FMIC and UA&P said Malacañang should step up in accommodating a possible shock in the short run while at the same time making solid moves in terms of cash management and spending in the long run.
Regarding cash management, the paper projected “a good amount of oversubscription” in the current offering of retail treasury bonds (RTBs).
In a price-setting auction held Monday, the Bureau of the Treasury raised P10 billion worth of 10-year RTBs at a coupon of 5.75 percent and P10 billion in 15-year RTBs at 6.25 percent.
The 10-year paper was more than twice oversubscribed while the 15-year securities were almost five times oversubscribed.
As for expenditures, Budget Secretary Florencio B. Abad had said that Malacañang’s plans to catch up on its spending program were working despite a budget surplus in August.
Abad said that national government spending seemed to have finally turned the corner as the state spent P114.93 billion last month, up 7.9 percent than the P106.5-billion registered in the same month of 2010.