- The US Core Personal Consumption Expenditures Price Index printed as expected at 0.30% month-on-month, and 2.60% year-on-year.
- The US S&P Global US Manufacturing Purchasing Managers’ Index (PMI) reported higher than expected at 52.70 versus a market estimate of 51.60 month-on-month.
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Market Movements
As of March 9, 2025
What to watch out for next?
What happened last week? (Feb. 25–March 03)
Credit spreads mostly widened by 1 to 12 basis points (bps) week-on-week amid worse-than-expected economic data out of the US. Asian sovereigns mostly ended 4 to 11 basis points wider, as US President Donald Trump reiterated tariffs on goods from Canada and Mexico.
Despite the risk-averse tone, sovereign credits continue to find two-way interest. Additionally, there are notable news for the sovereign of Bahrain. Fitch, a credit rating agency, revised Bahrain’s outlook to negative from stable while maintaining its rating at B+.
On the corporate side, investment-grade credits mostly widened by 1 to 8 bps, as players took profit on the rates rally. On the Philippine corporate side, better buying interest was seen for bonds issued by banks and SM Investments Corp. in the past week. Meanwhile, cash prices were 0.125 to 0.75 points higher.
What to watch out for next?
What to watch out for next?
What happened last week? (Feb. 25–March 03)
Credit spreads mostly widened by 1 to 12 basis points (bps) week-on-week amid worse-than-expected economic data out of the US. Asian sovereigns mostly ended 4 to 11 basis points wider, as US President Donald Trump reiterated tariffs on goods from Canada and Mexico.
Despite the risk-averse tone, sovereign credits continue to find two-way interest. Additionally, there are notable news for the sovereign of Bahrain. Fitch, a credit rating agency, revised Bahrain’s outlook to negative from stable while maintaining its rating at B+.
On the corporate side, investment-grade credits mostly widened by 1 to 8 bps, as players took profit on the rates rally. On the Philippine corporate side, better buying interest was seen for bonds issued by banks and SM Investments Corp. in the past week. Meanwhile, cash prices were 0.125 to 0.75 points higher.
- The US Core Personal Consumption Expenditures Price Index printed as expected at 0.30% month-on-month, and 2.60% year-on-year.
- The US S&P Global US Manufacturing Purchasing Managers’ Index (PMI) reported higher than expected at 52.70 versus a market estimate of 51.60 month-on-month.
What to watch out for next?
What to watch out for next?
On the data front, we have the US Initial Jobless Claims tomorrow, March 06, and US Nonfarm Payrolls and Unemployment Rate by Friday, March 07.
What to watch out for next?
Outlook
Looking ahead for the week, the focus will be on US President Donald Trump’s administration as they impose 25% tariffs on goods from Canada and Mexico, and an additional 10% on China.
At current levels, we still favor 2- to 5-Year bonds in terms of risk-reward ratio, and remain defensive towards longer-dated bonds.
What to watch out for next?
Disclaimer:
The report above is circulated for general information only. The opinions expressed are solely those of the contributors and are based on prevailing market conditions and public sources that are believed to be reliable. Metrobank and the report contributors/support staff do not make any guarantees or representation as to the accuracy, completeness or suitability of this report. The report may contain confidential or legally privileged material and may not be copied, reshared, redistributed, or published without prior written consent. Opinions or strategies contained in this publication may change without prior notice and should not take the place of professional investment advice or sound judgment on the part of the reader.
Bond Market Themes
Bond Market Themes
as of March 9, 2025Under a “Red Sweep” administration
The incoming Republican-dominated administration under Donald Trump has driven adjustments in the US financial markets, with Treasury yields surging as investors price in expectations of tax cuts and deregulation. The 10-Year Treasury yield has risen sharply, steepening the curve amid concerns over higher deficits and inflation. Mixed reactions were also seen in corporate credits, with investment-grade bonds having narrow spreads due to optimism over pro-business policies, while high-yield spreads widened slightly amid caution over market volatility. The interplay between fiscal expansion and Federal Reserve actions will be pivotal for Treasury yields, while corporate credits will watch for signs of economic growth and sector-specific regulatory changes.
The incoming Republican-dominated administration under Donald Trump has driven adjustments in the US financial markets, with Treasury yields surging as investors price in expectations of tax cuts and deregulation. The 10-Year Treasury yield has risen sharply, steepening the curve amid concerns over higher deficits and inflation. Mixed reactions were also seen in corporate credits, with investment-grade bonds having narrow spreads due to optimism over pro-business policies, while high-yield spreads widened slightly amid caution over market volatility. The interplay between fiscal expansion and Federal Reserve actions will be pivotal for Treasury yields, while corporate credits will watch for signs of economic growth and sector-specific regulatory changes.
Bond supply might not be enough
We believe that the current bond supply still cannot meet investor demand given the excess liquidity owing to various factors. It is estimated that the total new issuances for Asian credits will be more than USD 170 billion by the end of 2024, while the total maturities are estimated to be about USD 187 billion. This effectively returns USD 37 billion of capital to investors, which could be reinvested in Asian credits. Moreover, it is projected that there might be incremental demand from Hongkong-based China asset managers due to more relaxed rules on tapping onshore funds, and private banks with sizeable money-market exposures that may start to rotate into credit.
We believe that the current bond supply still cannot meet investor demand given the excess liquidity owing to various factors. It is estimated that the total new issuances for Asian credits will be more than USD 170 billion by the end of 2024, while the total maturities are estimated to be about USD 187 billion. This effectively returns USD 37 billion of capital to investors, which could be reinvested in Asian credits. Moreover, it is projected that there might be incremental demand from Hongkong-based China asset managers due to more relaxed rules on tapping onshore funds, and private banks with sizeable money-market exposures that may start to rotate into credit.
Don’t fight the central banks
We maintain our view that the US Fed is expected to cut 100 basis points by the end of 2024, given the progress towards the 2% inflation target. With the projected rate cuts, we expect a significant portion of the estimated USD 6 trillion in money market funds and total global money market assets of USD 9 trillion to move into credits as US Treasury yields decrease. Moreover, we also expect that the spillover effect of the People’s Bank of China’s (PBOC’s) monetary easing will set up strong technicals for Asia credit. Currently, we favor credits within Southeast Asia and India. We are also on the lookout for credit upgrade stories in Indian and Indonesian corporates.
We maintain our view that the US Fed is expected to cut 100 basis points by the end of 2024, given the progress towards the 2% inflation target. With the projected rate cuts, we expect a significant portion of the estimated USD 6 trillion in money market funds and total global money market assets of USD 9 trillion to move into credits as US Treasury yields decrease. Moreover, we also expect that the spillover effect of the People’s Bank of China’s (PBOC’s) monetary easing will set up strong technicals for Asia credit. Currently, we favor credits within Southeast Asia and India. We are also on the lookout for credit upgrade stories in Indian and Indonesian corporates.
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Our Bonds Selection
We highlight some of the bonds we currently prefer, based credit strength and value.
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