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Peso GS Weekly: Stay at the front-end
Players focus more on short-dated bonds amid lack of market-moving 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 better prices, following a rally in US Treasuries due to weak January US retail sales data. Institutional and retail players continued favoring short-dated bonds while de-risking in medium- to long-dated bonds. Elsewhere, Treasury bill (T-bill) yields climbed, as weaker auction interest pushed the 3-month T-bill rate up by 19 basis points (bps) to 5.318%, reflecting market caution after the Bangko Sentral ng Pilipinas’ (BSP) decision to hold off on rate cuts.
GS yields remained relatively steady amid a lack of new market-moving catalysts. Last Tuesday, the Bureau of the Treasury (BTr) fully awarded PHP 30 billion of the 10-Year benchmark, Fixed Rate Treasury Note (FXTN) 10-72, at an average rate of 6.118%. Accepted bids ranged from 6.05% to 6.145%.
Mid-week, the market saw a mild pickup in activity, as dealers targeted the 3- to 10-Year space, driven by a dip in global yields. Retail players remained focused on short-dated bonds, while institutional investors largely stayed on the sidelines.
Toward the end of the week, the market remained subdued until the BSP’s surprise announcement of a 200-bp cut to banks’ Reserve Requirement Ratio (RRR), effective March 28, sparked a late-session rally. On a week-on-week basis, local yields ended anywhere between 8 bps lower to 14 bps higher.
BVAL Rates
| Tenor | 21-Feb-25 | 14-Feb-25 | Change |
|---|---|---|---|
| 1M | 4.96% | 5.04% | -0.08% |
| 3M | 5.29% | 5.16% | 0.14% |
| 6M | 5.59% | 5.56% | 0.03% |
| 1Y | 5.79% | 5.74% | 0.05% |
| 2Y | 5.80% | 5.80% | 0.00% |
| 3Y | 5.84% | 5.85% | -0.01% |
| 4Y | 5.88% | 5.90% | -0.02% |
| 5Y | 5.92% | 5.95% | -0.03% |
| 7Y | 6.01% | 6.04% | -0.03% |
| 10Y | 6.13% | 6.13% | 0.00% |
| 20Y | 6.36% | 6.35% | 0.01% |
| 25Y | 6.36% | 6.30% | 0.05% |
What we can expect
At current levels, we advise caution in extending duration and recommend focusing on short-dated securities, as the curve remains prone to steepening due to supply risk.
Attention shifts to the BTr’s auction of the 20-Year FXTN 20-27 tomorrow, with an indicative range of 6.350% – 6.500%.
Top GS Picks
| Security | Yield to Maturity | Tenor (Years) | Maturity |
|---|---|---|---|
| RTB 5-13 | 5.63% | 0.46 | 12-Aug-25 |
| FXTN 7-62 | 5.73% | 0.97 | 14-Feb-26 |
| RTB 5-15 | 5.75% | 2.02 | 4-Mar-27 |
| RTB 5-17 | 5.83% | 3.49 | 22-Aug-28 |
| RTB 5-18 | 5.85% | 4.01 | 28-Feb-29 |
| FXTN 20-17 | 5.93% | 6.4 | 19-Jul-31 |
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.)