Peso GS Weekly: Opportunistic buyers emerge amid elevated yields 

WHAT HAPPENED LAST WEEK

Risk sentiment in the local government securities (GS) market remained weak for the better part of last week as global yields and the USD/PHP exchange rate traded at multi-month highs. Selling interest was apparent in long-term bonds, with some players off-loading duration as they re-assess the central bank’s monetary path.

The inclement weather brought about by the recent typhoon also led to slower market activity, with most dealers just managing client requirements. Some opportunistic buying interest, however, emerged as players capitalize on the move to load up on GS at relatively elevated levels.

Towards the end of the week, the effectivity of the Reserve Requirement Ratio (RRR) cut failed to materially move the GS curve, with liquidity suspected to go back to the Bangko Sentral ng Pilipinas (BSP) given the increased demand for their Term Deposit Facility—their liquidity absorption facility.

Overall, most yields ended 4 to 10 basis points higher week-on-week.

Market Levels (week-on-week)

WHAT WE CAN EXPECT

Our indicative range for the reissuance of the Fixed Rate Treasury Note 10-72 for today’s 10-Year auction stands at 5.825-5.950%.

Should sentiment remain weak amid the recent sell-off in global yields, opportunistic buying interest may be seen towards the higher-end of indications as players try to scale-in GS at more favorable levels.

Moreover, we expect volatility to persist in the near-term amid the heavy economic data calendar in the US and ahead of the presidential election next week.

See our top picks below:

Note: Rates are indicative and subject to refresh.