Philippine Debt-Yields seen up ahead of corporate debt sales

MANILA, Feb 9 - Philippine debt yields are expected to be broadly steady with an upward bias this week, with some banks seen selling government bonds to make room for upcoming corporate bond issues, traders said on Monday.

Yields in the secondary debt market climbed slightly by 10 basis points last week after consumer prices rose 0.3 percent in January following a 0.9 percent drop in December, although the headline annual inflation rate fell to a 10-month low at 7.1 percent.

Traders said yields may trend higher this week with banks preparing for a series of fresh corporate debt issues expected to hit the market in the coming weeks.

"It is going to be a rangebound market for this week, but yields may tend to go up because some investors might be starting to sell their government security holdings ahead of corporate issues that are coming up," a trader from a local bank said.

San Miguel Brewery <SMB.PS>, the Philippine flagship of the San Miguel Group, wants to raise 38.8 billion pesos ($825 million) from the domestic and international bond markets before the end of March to fund its purchase of domestic beer brands and real estate from its parent firm.

Globe Telecom <GLO.PS> had said in November it plans to issue an initial 5 billion pesos in retail bonds in the early part of this year to partly fund its operations.

An auction of 7 billion pesos worth of 91-day, 182-day and 364-day treasury bills on Monday is expected to attract lower bids on expectations of another rate cut when the central bank holds a policy meeting on March 5, traders said.

The three-month paper <PH3MT=RR> is seen fetching an average rate of 4.5 percent, lower than bids in the secondary market of around 4.8 percent.

The six-month <PH6MT=RR> and one-year papers <PH1YT=RR> are likely to attract an average rate of 4.75 and 5 percent, respectively, also below current secondary market rates.

Traders said the market's medium-term view is for yields to remain generally on a downtrend as slowing inflation and a weaker economy pressure authorities to ease policy further. The central bank has lowered interest rates by a total 100 basis points in the past two months.

BEST BIDS DONE DEALS

Feb 9 Feb 2 Feb 9 Feb 2

(in percent) three-month <PH3MT=RR> 4.8173 4.6481 4.7000 4.6000 six-month <PH6MT=RR> 5.0077 4.7327 4.9000 4.7000 one-year <PH1YT=RR> 5.2173 4.8808 5.1000 4.8000 two-year <PH2YT=RR> 5.9673 5.5827 5.8000 5.5000 three-year <PH3YT=RR> 6.2269 5.8750 6.1000 5.8000 four-year <PH4YT=RR> 6.5442 6.0769 6.4500 6.0000 five-year <PH5YT=RR> 6.7269 6.2596 6.5292 6.1402 seven-year <PH7YT=RR> 7.4673 7.0096 7.3750 6.8418 ten-year <PH10YT=RR> 7.7365 7.4565 7.6250 7.3750 20-year <PH20YT=RR> 10.7731 10.4712 10.5000 10.3750 25-year <PH25YT=RR> 11.2654 10.9038 11.0000 10.7500 *Values based on fixing by the Philippine Dealing and Exchange Corp (PDEX) as of 11:17 p.m. [0317 GMT]