YIELDS on government securities (GS) traded on the secondary market mostly rose last week following the release of key US inflation data that led markets to reprice their US Federal Reserve rate cut bets.

GS yields, which move opposite to prices, went up by an average of four basis points (bps) last week, based on data from PHP Bloomberg Valuation Service Reference Rates as of Jan. 17 published on the Philippine Dealing System’s website.

Rates at the short end mostly went down. The 91- and 182-day Treasury bills (T-bills) saw their yields decline by 25.38 bps (to 5.4973%) and 19.34 bps (5.6265%), respectively. Meanwhile, the rate of the 364-day T-bill climbed by 3.92 bps to 5.8954.

At the belly, yields were higher week on week except that on the two-year Treasury bond (T-bond), which declined by 1.40 bps to 5.948%. Rates of the three-, four-, five-, and seven-year bonds rose by 6.08 bps (to 6.0656%), 10.85 bps (6.1457%), 13.41 bps (6.1975%), and 16.23 bps (6.2716%), respectively.

Lastly, at the long end, rates climbed across the board. Yields on the 10-, 20-, and 25-year T-bonds went up by 18.48 bps (to 6.3333%), 10.49 bps (6.3931%), and 10.64 bps (6.3919%), respectively.

GS volume traded was at P27.87 billion on Friday, lower than the P34.56 billion recorded a week earlier.

Traders said GS yields were higher following the release of US inflation data and amid elevated US rates in recent weeks as markets continue to adjust their Fed policy outlook, especially with US President-elect Donald J. Trump set to take office.

“We saw bond yields trade higher this week following some data releases in the US, which could support the case of slower interest rate cuts,” the first bond trader said in a Viber message.

“The market reacted more to the news in US rather than from domestic front,” the second trader said in a phone interview.

The second trader said local yields have been moving up amid higher US Treasury rates, even amid better-than-expected US consumer inflation data and dovish comments from some Fed officials.

On Friday, US Treasury yields turned higher with the dollar as upbeat economic data and earnings appeared to help investors shrug off any jitters ahead of the US presidential inauguration, Reuters reported.

The US dollar strengthened against major peers after four days of declines, while benchmark US Treasury yields — after a three-session drop — hit a two-week low before reversing course.

On Wednesday, softer-than-forecast core inflation data had pushed down the US 10-year yield. Adding more encouragement were comments from Fed Governor Christopher Waller on Thursday signaling that three or four rate cuts are still possible in 2025 if data is weaker.

Yields drifted higher in a choppy session after the upbeat housing and industrial production data supported expectations that the Fed would slow the pace of rate cuts.

The yield on benchmark US 10-year notes rose 1.5 basis points to 4.621%, from 4.606% late on Thursday while the 30-year bond yield rose to 4.8535% from 4.845%.

The two-year note yield, which typically moves in step with Fed interest-rate expectations, rose 4.5 basis points to 4.283%, from 4.238% late on Thursday.

The Fed is widely expected to keep rates steady at its policy meeting later this month, with the markets pricing in a greater than 50% chance for a cut of at least 25 basis points until June, LSEG data showed.

Both traders said the market’s focus remains on how Mr. Trump’s potential policies would affect US inflation and, in turn, the Fed’s policy path, with the second trader noting that bets on the Bangko Sentral ng Pilipinas’ future easing moves have been priced in already.

The second trader added that the market turned defensive after last week’s T-bond auction as the awarded average rate was at the higher end of the expected range due to cautiousness before Mr. Trump’s inauguration, which indicates some aggressiveness on the Bureau of the Treasury’s (BTr) part.

The BTr’s willingness to award at high rates could cause GS rates to rise further, the trader said.

On Tuesday, the BTr raised P30 billion as planned via the reissued 10-year bonds as total bids reached P54.219 billion or almost double the amount on offer.

The bonds, which have a remaining life of seven years and eight months, were awarded at an average rate of 6.249%. Accepted yields ranged from 6.075% to 6.29%.

The average rate of the reissued papers was 2.3 bps above the 6.226% seen for the same bond series and 9.1 bps higher than the 6.158% quoted for the seven-year bond at the secondary market before the auction.

For this week, the first trader said GS rates may continue to track US yield movements.

“We do expect yields to stabilize at a clearer range [this] week, although traders will likely pay close attention to President Trump’s rhetoric when he is sworn into office and how he will pursue his policies moving forward,” the first trader said.

“We expect market to continue to monitor comments from the Fed and the BTr’s awarding behavior,” the second trader added.

On Monday, the Treasury will auction off P22 billion in T-bills, or P7 billion each in 91- and 182-day papers and P8 billion in 364-day papers. On Tuesday, it will offer P30 billion in reissued 10-year T-bonds with a remaining life of nine years and 14 days. — P.O.A. Montalvo with Reuters