Peso GS Weekly: Going for the belly of the curve 

WHAT HAPPENED LAST WEEK

It was a lackluster week in the local government securities (GS) market as most players were reluctant to take on positions heading into a heavy slate of risk events on the US front, and with the trading week shortened due to local holidays. De-risking activity, however, applied pressure on local yields, with the curve ending the week anywhere from 2.5 to 9.5 basis points (bps) higher.

Last Tuesday, the Bureau of the Treasury fully awarded PHP 15 billion of the 10-Year bond, Fixed Rate Treasury Note 10-72, at the average rate of 5.87%. The accepted range was from 5.828% to 5.89%, or just within market indications. The total market participation reached PHP 43.3 billion, bringing the bid-to-cover ratio to 2.89x.

The fresh supply was easily digested by the market, but failed to noticeably influence GS yields. FXTN 10-72 ultimately ended the week at 5.88%, which is 1 bp higher from the auction average, or 6 bps higher week-on-week.

Overall, activity was mostly concentrated in the medium-term bonds, with the 5-Year Retail Treasury Bond 5-18 ending 6 bps higher as well at 5.795%.

Market Levels (week-on-week)

WHAT WE CAN EXPECT

For the week ahead, GS price action will likely be dictated by moves in the global bond space, with players highly anticipating the results of the US elections and its impact on global markets.

On the local front, the October Consumer Price Index printed lower-than-expected at 2.3% versus the consensus of 2.4%, but higher from last September’s 1.9%.

For now, we recommend to remain nimble as volatility may reign in today’s session. We also prefer to overlook any knee-jerk sell-offs coming from the election results, given that expectations are still for the Bangko Sentral ng Pilipinas to continue with its monetary easing campaign.

See our top picks below:

Note: Rates are indicative and subject to refresh.