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Peso GS Weekly: Take profit at the rally
There’s a window to sell at a profit as yields decline amid excess money supply after the RRR cut.
By Metrobank Local Currency Trading Department and Maria Christina Virtudazo
What happened last week
The local government securities (GS) market started last week with subdued activity, as levels remained unchanged from the previous Friday’s close. There was good two-way interest in 4- and 7-Year bonds. However, most liquidity was still being deployed in shorter-term securities, as investors awaited clarity on the Bureau of the Treasury’s (BTr) borrowing plans.
On Monday, Treasury bill yields for 3- and 6-month tenors rose by 4 to 6 basis points (bps), while the 1-Year bill outperformed, declining by 2 bps week-on-week.
By Tuesday, the BTr’s dual tranche auction for 3- and 25-Year bonds saw strong demand for the shorter tenor whose bids reached four times more than the offer size. Meanwhile, the 25-Year bond saw softer interest. The yield curve steepened after the auction, with the 3.5- and 4-Year bonds rallying slightly, while 7- to 10-Year bonds closed higher by 2 bps.
Midweek, a rally in US Treasuries and risk assets such as real estate and commodities influenced the local GS market, with benchmark bonds falling 2 to 6 bps. The market remained well-bought on Thursday as quarter-end demand drove yields lower across the curve. The 4-Year bond was the most actively traded security, while the 11-Year bond saw the largest drop, closing 9 bps lower.
The BTr also released its borrowing program for the second quarter of 2025, maintaining the weekly Treasury Bond auction size at PHP 30 billion, except for the dual-tranche format which was raised to PHP 40 billion each. That brings the total planned domestic borrowing to PHP 735 billion, including Treasury Bills amounting to PHP 25 billion per week.
By Friday, local GS yields continued to fall as domestic banks deployed excess liquidity before quarter-end. The overnight bounce in US Treasuries provided additional support. The 7- to 9-Year space led the rally, though profit-taking in the afternoon trimmed gains slightly. On a week-on-week basis, benchmark yields ended anywhere between 6 bps lower to 12 bps higher.
BVAL Rates
| Tenor | 28-Mar-25 | 21-Mar-25 | Change |
|---|---|---|---|
| 1M | 5.11% | 5.11% | 0.00% |
| 3M | 5.30% | 5.18% | 0.12% |
| 6M | 5.62% | 5.53% | 0.09% |
| 1Y | 5.78% | 5.69% | 0.09% |
| 2Y | 5.75% | 5.78% | -0.03% |
| 3Y | 5.78% | 5.83% | -0.05% |
| 4Y | 5.84% | 5.89% | -0.06% |
| 5Y | 5.90% | 5.96% | -0.06% |
| 7Y | 6.04% | 6.10% | -0.06% |
| 10Y | 6.22% | 6.24% | -0.02% |
| 20Y | 6.32% | 6.31% | 0.01% |
| 25Y | 6.31% | 6.31% | 0.01% |
What can we expect
Looking ahead, market attention turns to the BTr’s upcoming 5-Year bond reissuance of Fixed Rate Treasury Note 7-70, with an indicative range of 5.875% – 5.975%.
Key risk events include the release of the Philippines’ annual headline inflation data – projected at 2.1% by Bloomberg – and US tariff developments on April 2, which could impact global sentiment. Given the strong rally in local GS, we advise clients to take profits and wait for better re-entry levels in upcoming auctions.
Top GS Picks
| Security | Yield to Maturity | Tenor (Years) | Maturity |
|---|---|---|---|
| FXTN 20-14 | 5.73% | 2.43 | 6-Sep-27 |
| FXTN 7-64 | 5.73% | 3.06 | 22-Apr-28 |
| RTB 5-18 | 5.78% | 3.92 | 28-Feb-29 |
| FXTN 7-70 | 5.88% | 5.32 | 27-Jul-30 |
| FXTN 10-69 | 6.02% | 7.46 | 15-Sep-32 |
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.)