Peso GS Weekly: Local bond yields may continue their descent
Will the market continue to suppress its appetite for longer-tenor bonds? For this week, we believe these five bonds deserve your attention.
WHAT HAPPENED LAST WEEK
Yields of peso government securities (GS) took their cue from the global bond market following the rally in US Treasuries, as better buying interest was seen ahead of the 13-year auction on Tuesday.
The Bureau of the Treasury (BTr) fully awarded PHP 35 billion for the reissuance of Fixed Rate Treasury Note (FXTN) 25-7 with an average yield of 7.182% and a high of 7.23%. Given the oversubscription of 5.29x, the BTr offered another PHP 5 billion via the TAP facility, which was easily absorbed by the market. Given the strength of the auction, aggressive position-taking was seen for 12- to 13-year bonds as yields were lifted down to 6.95% to 7.00%.
Continued buying interest was seen the rest of the week despite statements from Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla ruling out the possibility of policy rate cuts or pauses in the near term as inflation remains elevated. Five-year bonds rallied by as much as 47.5 to 60 basis points (bps), while yields of seven-year bonds fell by 50 to 57.5 bps, and the 12 to 13-year bonds by 80 to 85 bps.
Some profit-taking, however, was seen towards the end of the trading day