Higher yield on 10-year bonds seen this year | Inquirer Business

Higher yield on 10-year bonds seen this year

Yields on Philippine treasury bonds are no longer expected to average lower this year than in 2011 considering that developments in Europe are making domestic liquidity more uncertain.

DBS Group said in a research note that, in particular, rates on the 10-year issues were now projected to exceed 6 percent, reaching 6.75 percent in the second semester “if the crisis in Europe is not contained soon.”

The financial services provider previously predicted that domestic bond yields would stay low since no more policy rate cuts were expected for the rest of the year especially in light of an inflation outlook pointing to a slight increase.

Article continues after this advertisement

Last week, the Bangko Sentral ng Pilipinas decided to keep its overnight borrowing rate at 4 percent and overnight lending rate at 6 percent—levels that DBS said were its “lowest for this easing cycle.”

FEATURED STORIES

From there, the Singapore-based group said it expected the next moves to be upward, although this might not happen until the second quarter of 2013.

Such a prospective flat trajectory for policy rates is good news, hinting that bond yields can likewise stay low “if liquidity conditions remain favorable.”

Article continues after this advertisement

“Overall, that is likely to be the case, but liquidity has tightened somewhat since September as shown by the upward pressure on interbank rates (with the thee-month offered rate reaching 3.25 percent as of mid-June),” DBS maintained.

Article continues after this advertisement

“As tighter conditions are likely to stay amid the global crisis environment, interbank rates are unlikely to fall in the third quarter,” the group said. “In fact, they could rise above the policy rate and back to the 4 percent to 5 percent range, if the crisis in Europe escalates.”

Article continues after this advertisement

Even then, DBS said overall liquidity should remain good enough to allow the three-month Philippine interbank offered rate to remain below the policy rate and for government bond yields to stay low.

However, DBS noted that the yield on 10-year bonds, which averaged 6.46 percent in 2011, was now likely to go higher than 6 percent this year when previously it said this would not happen.

Article continues after this advertisement

Yield on the 10-year issue “could remain under upward pressure in the third quarter if the crisis in Europe is not contained soon,” DBS said.

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

TAGS: Bonds and t-bills, forecasts, Philippines, treasury bonds

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our newsletter!

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

© Copyright 1997-2024 INQUIRER.net | All Rights Reserved

This is an information message

We use cookies to enhance your experience. By continuing, you agree to our use of cookies. Learn more here.