FMIC and UA&P: PHL bond yields to drop as much as 60 basis points

Interest yields on government bonds will continue tracing a downtrend this 2013, losing as much as 50 to 60 basis points. 

 

“Since short-term t-bills are already very low, action will likely occur in the longer end of the curve,” according to a joint research – “Market Call” – by First Metro Investment Corp. and University of Asia and the Pacific.

 

Bond yields will ease because of continued capital inflow and less supply of government debt papers due to lower borrowing requirements of government, according to Market Call.

 

The decline in yields will reduce the supply of longer-term government papers due to the lower deficit and borrowing requirements of the government, FMIC and UA&P noted, saying supply constraints will likely come about boost trading volume in the market.

 

The could mean a higher volume of trading in Philippine sovereign bonds, pushing the country's debt back to the No. 2 spot. China regained the No.1 one slot in 2012, outpacing Thailand, while the Philippines dropped to third place with Malaysia.

 

“This could mean more trading income for some banks that are able to time well their entry and exit in the market,” FMIC and UA&P noted.

 

But FMIC and UA&P noted the gains in terms of yield will stay on the low side this year, telling investors not to expect much especially since the market has already factored in the much-touted investment grade rating from debt watchers that the government expects to happen in the second half of the year.

 

The Philippine bond market was one of the fastest growing in East Asia, with its glowing macroeconomic fundamentals and better yields attracting investors from problem-ridden Europe and the US. — VS, GMA News