Long-term interest rates seen slowing down

MANILA, Philippines - First Metro Investments Corp. (FMIC) said it sees interest rates on longer-dated government securities slowing down a bit in the third quarter with the softening of US Treasuries yields.

During its mid-year investors briefing Thursday, FMIC senior vice president Reynaldo B. Montalbo Jr. said the movement of interest rates would be marginal   especially with a possible slowing of US economic growth.

The yield on the three-month debt paper will stay modest at 0.9 to 1.1 percent while the interest rate on five-year Treasury bills will range from 3.35 percent to 3.65 percent.

The 10-year bills are seen to fetch a rate of 4.05 percent to 4.25 percent while the interest rate on 20-and 25-year bills are seen to range at 5 to 5.5 percent to 5.7 to 5.9 percent.

Policy rates, liquidity, inflation and foreign exchange are the factors that continue to affect the short-end yield of the curve.

The long-end of the curve, on the other hand is affected by US and EU recovery, liquidity and the government’s borrowing program.

Despite the lower-than-expected GDP growth for the first quarter of 5.7 percent, yields fell across all tenors.

GDP growth slowed due to the delayed effects of Super Typhoon Yolanda to agriculture and weakness in manufacturing output. Government spending also slid from 10 percent to two percent.

Montalbo said the government is expected to resume issuing longer tenor bonds as yields have stabilized.

With more issues, secondary trading should also become more active, he said.

The government will issue P135 billion in debt papers in the third quarter.  The amount is the same level as the previous quarter.

Under the plan, the government will sell P20 billion worth of 91-,182- and 364-day Treasury bills per month from July to September.

The government will offer P25 billion worth of seven, 10 and 20 year Treasury bonds.