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Peso GS Weekly: Yields react to global shifts
The Philippine bond market’s currently shaped by a mix of global developments and evolving local sentiment, warranting close analysis.
By Metrobank Local Currency Trading Department and Janssen Roman
What happened last week
Cautious trading dominated the start of the week, as Moody’s US downgrade pushed 10Y US Treasury yields above 4.50%, de-risking in 7-10Y segments. Despite this, front-end bonds saw good demand, steepening the overall yield curve, and last week’s T-bill offerings were fully awarded.
By mid-week, local bonds opened strong, buoyed by a US Treasury rally that reversed a recent global bond cheapening. The 10-year auction saw exceptional demand, with tendered bids reaching PHP 109.5 billion, prompting the Bureau of the Treasury to open a tap facility for PHP 10 billion more than the initial offer size. That was met with robust interest, leading to local benchmark bonds ending lower.
Toward the end of week, local yields faced pressure as risk sentiment deteriorated, and US Treasuries rose. Selling activity was concentrated in the belly to back-end segments, steepening the curve, but some buying emerged as yields climbed, with most bond yields closing 1-4bps higher.
BVAL Rates
| Tenor | 23-May-25 | 19-May-25 | Change |
|---|---|---|---|
| 1M | 5.19% | 5.45% | -0.26% |
| 3M | 5.46% | 5.51% | -0.05% |
| 6M | 5.61% | 5.63% | -0.02% |
| 1Y | 5.74% | 5.70% | 0.04% |
| 2Y | 5.75% | 5.76% | -0.01% |
| 3Y | 5.80% | 5.79% | 0.01% |
| 4Y | 5.84% | 5.83% | 0.01% |
| 5Y | 5.90% | 5.88% | 0.02% |
| 7Y | 6.04% | 6.01% | 0.03% |
| 10Y | 6.27% | 6.17% | 0.10% |
| 20Y | 6.48% | 6.27% | 0.21% |
| 25Y | 6.50% | 6.27% | 0.23% |
What we can expect
Local bonds are likely to remain sensitive to global developments this week, with no major domestic catalysts. However, opportunistic bidding interest may continue, supported by the economic backdrop that increases the likelihood of Bangko Sentral ng Pilipinas’s rate cuts. We still favor 10Y bonds and look ahead to next week’s 15Y bond auction.
Top GS Picks
| Security | Yield to Maturity | Tenor (Years) | Maturity |
|---|---|---|---|
| RTB 5-18 | 5.80% | 3.8 | 28-Feb-29 |
| FXTN 7-70 | 5.91% | 5.21 | 27-Jul-30 |
| FXTN 10-69 | 6.07% | 7.35 | 15-Sep-32 |
| FXTN 10-72 | 6.13% | 8.71 | 25-Jan-34 |
| FXTN 10-73 | 6.25% | 9.97 | 28-Apr-35 |
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.)