Peso GS Weekly: Local yields at a sell-off
Despite the rally in US Treasury yields mid-week, the local GS market remains well-offered.
WHAT HAPPENED LAST WEEK
Range trading persisted in last week’s session ahead of the key risk events later in the week. On Tuesday, the Bureau of Treasury fully awarded the reissuance of the 14-Year Fixed Rate Treasury Note (FXTN) 20-23 at an average of 6.103% and a high of 6.125%, or well within market indications.
Despite the rally in US Treasury yields during the middle of the week, the local government securities (GS) market remained-well offered. Profit-taking activity were easily met by players deploying their maturity proceeds coming from the PHP 120-billion maturity of FXTN 10-59. On a week-on-week basis, yields rose 2-4 basis points (bps).
Toward the end of the shortened trading week, BSP Bills saw significant interest from eligible clients amid the cancellation of the auction. Yields of the dated BSP securities fell by as much as 20 bps week-on-week.
Elsewhere, Moody’s affirmed the Philippines’ investment grade rating with a stable outlook on recent economic reforms, but flagged persistent pressures brought about by higher debt levels, rising interest rates and tensions with China.
Market Levels (week-on-week)
WHAT WE CAN EXPECT
On the local front, the next catalyst is the 20-Year auction today, the reissuance of FXTN 20-27 where our indicative range stands at 6.175-6.325%. Given expectations of further rate cuts in the coming months, players may still be seen accumulating bonds in the auctions as they continue to extend duration.
See our top picks below:
Note: Rates are indicative and subject to refresh.