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Peso GS Weekly: Auctions, liquidity boost, and tariffs
Local bond market to be driven by additional long-dated bond supply, liquidity boost, and global trade war policy shifts.
By Metrobank Local Currency Trading Department and Janssen Roman
What happened last week
At the start of the week, trading was relatively quiet as market participants mainly managed existing positions.
There was strong interest in short-term government securities, particularly Treasury bills, as investors reinvested recent maturities. The government’s T-bill auction saw significant demand, leading to lower yields. Total bids reached PHP 119 billion. The Bureau of the Treasury (BTr) responded by increasing the awarded amounts beyond the initial offer.
Meanwhile, some investors adjusted their portfolios ahead of a scheduled reissuance of a 10-year bond. Despite positive inflation data and expectations of a central bank rate cut in April, market players remained cautious, anticipating more long-term bond issuances in the coming months.
By mid-week, trading activity picked up, with market players reacting to the reissuance of the 10-year bond. The auction was well received, with awarded yields falling within expectations, though some profit-taking emerged later in the session.
Investors continued to monitor global events, especially last week’s US Federal Reserve’s policy meeting, adding a layer of uncertainty.
On the local front, lack of major economic updates made traders focus on global bond market moves and prepared for the Philippine government’s upcoming borrowing plans. With the likelihood of more long-term debt issuances, market players preferred to lock in profits on longer-term bonds while maintaining a wait-and-see approach.
By the end of the week, trading volumes remained light, as investors awaited key developments, including this week’s dual-tranche bond auction. The market remained range-bound, with little movement in yields despite a decline in US Treasury rates. Investors continued to price in an upcoming reduction in banks’ reserve requirement ratio (RRR), which was expected to inject liquidity into the system but had minimal immediate impact on bond yields
BVAL Rates
| Tenor | 21-Mar-25 | 14-Mar-25 | Change |
|---|---|---|---|
| 1M | 5.11% | 5.07% | 0.04% |
| 3M | 5.18% | 5.25% | -0.07% |
| 6M | 5.53% | 5.57% | -0.04% |
| 1Y | 5.69% | 5.79% | -0.10% |
| 2Y | 5.78% | 5.80% | -0.02% |
| 3Y | 5.83% | 5.84% | -0.01% |
| 4Y | 5.89% | 5.89% | 0.00% |
| 5Y | 5.96% | 5.95% | 0.01% |
| 7Y | 6.10% | 6.08% | 0.02% |
| 10Y | 6.24% | 6.23% | 0.01% |
| 20Y | 6.31% | 6.32% | -0.01% |
| 25Y | 6.31% | 6.31% | 0.00% |
What we can expect
This week, key market drivers include the BTr’s dual-tranche issuance of securities, the release of the second-quarter 2025 borrowing schedule, and an expected PHP 300 billion liquidity boost from the RRR cut. The upcoming auction is expected to price within 5.750% – 5.850% for the 3-year bond and 6.425% – 6.600% for the 25-year bond.
Meanwhile, global market sentiment will be shaped by developments in US trade policy.
Moving forward, local market movement will likely be dictated by the BTr’s borrowing strategy and global risk sentiment. The focus will now shift to the government’s funding plans for the second quarter, particularly the issuance of longer-term securities, which could influence yield movements in the coming weeks.
Given current market conditions, investors may find it favorable to lock in profits on longer-term bonds and shift focus toward short- and medium-term securities. This may provide better flexibility amid evolving economic and policy factors.
Top GS Picks
| Security | Yield to Maturity | Tenor (Years) | Maturity |
|---|---|---|---|
| RTB 5-13 | 5.58% | 0.39 | 12-Aug-25 |
| FXTN 7-62 | 5.68% | 0.9 | 14-Feb-26 |
| RTB 5-15 | 5.73% | 1.95 | 4-Mar-27 |
| RTB 5-17 | 5.81% | 3.42 | 22-Aug-28 |
| RTB 5-18 | 5.91% | 3.94 | 28-Feb-29 |
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.)