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Peso GS Weekly: Focus on short-tenor bonds
Market players focus on the front-end to belly of the curve while awaiting catalysts
By Metrobank Local Currency Trading Department and Maria Christina Virtudazo
WHAT HAPPENED LAST WEEK
The local government securities (GS) market started last week with good two-way interest, as the lack of catalysts kept market players initially on the sidelines. Activity was mostly concentrated at the belly of the curve, such as the 5-Year Retail Treasury Bond 5-18.
Elsewhere, the Bureau of the Treasury (BTr) fully awarded their first Treasury bill issuance of the year, with good demand seen as it was awarded at levels that were 3 to 6.5 basis points (bps) lower than the previous issuance.
Last Tuesday, the BTr held its first auction of the year and fully awarded the reissuance of the 5-Year Fixed Rate Treasury Note at an average of 6.06%, with accepted bids ranging from 6.03% to 6.075%, or near the lower end of indications.
The GS curve continues to steepen, as market players began to de-risk across the 7- to 20-Year tenors and was met by some opportunistic buying interest by end of the week. Meanwhile, strong demand for short-dated bonds led to lower yields in the front-end of the curve. This was caused by Savings and Time Deposit rates starting to decline following the recent cuts of the Bangko Sentral ng Pilipinas.
On a week-on-week basis, yields traded anywhere between 19 bps higher or lower from the previous week’s close.
Market Levels (week-on-week)
WHAT WE CAN EXPECT
For Tuesday’s auction, the BTr announced the reissuance of PHP 30 billion of the 7-Year Fixed Rate Treasury Note 10-69. Our indicative range stands at 6.075% – 6.275%. We expect strong demand from those looking to extend duration at the 6.20% level.
At current levels, market movements will likely be influenced by the US nonfarm payrolls data and its impact on global yields and the US Dollar.
See our top picks below:
Note: Rates are indicative and subject to refresh.
(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)