Peso GS Weekly: Profit-taking at the belly 

WHAT HAPPENED LAST WEEK

The local government securities (GS) market started the week muted on lack of catalysts to significantly influence yields. Players remained on the sidelines ahead of the week’s key risk events.

Elsewhere, the Bureau of Treasury (BTr) fully awarded offers at their Treasury bill (T-bill) auction. Good demand was seen for the 3-month bill, as it was awarded at roughly 2 basis points (bps) lower than the previous auction. Meanwhile, the 6-month and 1-year bills were awarded at yields 2.5 and 3bps higher, respectively.

There were no bond auctions last week. The local GS market continued to trade sideways ahead of the local Consumer Price Index (CPI) print on Thursday. Most activity for the week was seen in the 5-Year benchmark bond, Retail Treasury Bond 5-18.

Mid-week, the GS market saw decent activity in the front-end of the curve, leading to a flattening curve. By Thursday, the much-awaited November CPI print came out in line with expectations at 2.50%. Activity eventually picked up as players tried to pick tops ahead of the potential easing by the Bangko Sentral ng Pilipinas (BSP). Profit-taking was seen on the belly of the curve to end the week ahead of the US Non-Farm Payrolls (NFP) data. Week-on-week, GS yields ended anywhere between 11 bps lower to 18 bps higher.

Market Levels (week-on-week)

WHAT WE CAN EXPECT

At current levels, the local GS market will continue to trade in their recent ranges ahead of tomorrow’s 10-Year supply. With a stronger-than-expected NFP data print last Friday, market players will be on the lookout for the Fed’s rhetoric on their policy stance.

For tomorrow’s auction, the BTr announced they will reissue PHP 15 billion of Fixed Rate Treasury Note 10-72, with an indicative range at 5.85-6.00%. We remain better buyers of bonds in the belly part the curve, given the value they provide against neighboring securities.

See our top picks below:

Note: Rates are indicative and subject to refresh.