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Financial IQ Philippines Quick Hit(s):
Coupon rates of bonds keep getting smaller. There are other financial instruments that give better return than bonds... and yes, some of these instruments offer fixed interest as well.
HIGH LIQUIDITY in the financial system and expectations of a rate cut of the central bank’s special deposit account (SDA) rates are projected to push down the rate of the fresh three-year Treasury bonds at the auction tomorrow.
Bond traders interviewed by phone last Friday said the three-year debt papers may settle anywhere from 2.125% to 2.25%, or 3.5-16 basis points lower than their 2.285% rate at the secondary market last Friday.
“There is so much liquidity in the system as shown by the latest Bangko Sentral ng Pilipinas’ (BSP) SDA data,” a trader said.
As of Feb. 22, a total of P1.855- trillion funds was placed in SDAs, up 2.37% from the P1.812 trillion parked as of Jan. 25, latest central bank data showed.
In a separate phone interview, another bond trader said: “Expectations of a cut in SDA rates after the Monetary Board’s meeting [this] Thursday could also be priced in by dealers in their bids so we could see lower rates at the auction.”
“Market players expect the central bank to slash SDA rates by 50 basis points to 2% amid manageable inflation and expectations of more capital inflows in the country after the Philippines notched a credit rating upgrade from Fitch,” the trader added.
http://www.bworldonline.com/content.php?section=Finance&title=Three-year-bond-rates-to-fall&id=68990
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