Wait-and-see mode for bond investors

MANILA, Philippines — Investors are expected to approach the upcoming sale of government securities with caution in anticipation of the US Federal Reserve’s announcement on the schedule of its looming taper.

Bond traders told The STAR that investors may wait for the results of the upcoming Federal Open Market Committee (FOMC) meeting slated from Sept. 21 to 22.

As such, traders said they anticipate the auction of Treasury bills (T-bills) to fetch mixed yields and Treasury bonds (T-bonds) to settle within the secondary market, signaling that investors may take a wait and see mode when buying debt papers issued by the government.

“We expect T-bills to move sideways for this week’s auctions. As for the seven-year T-bonds, we project rates to settle between 3.75 percent and 3.875 percent,” a trader said.

Another trader said investors may adjust the pace of their asset purchases if the Fed decides to lift monetary support as early as the fourth quarter. The trader also said investor sentiment points to a taper only by December or January.

“Investors will monitor the Fed’s decision on when monetary support will be relaxed, as this may be discussed and even concluded in the upcoming FOMC meeting,” the trader said.

“We don’t see that asset purchases in the US will be changed anytime soon, but market signals point to a tapering before the year ends,” the trader said.

Further, investors will look out for the Monetary Board meeting scheduled on Sept. 23, but a trader said the body is widely expected to keep interest rate at a record low of two percent.

The Bureau of the Treasury on Monday will sell P15 billion in T-bills, at P5 billion each for tenors of 91 days, 182 days and 364 days. The agency on Tuesday will then auction P35 billion worth of reissued seven-year T-bonds, with a remaining life of six years and 10 months.