3 themes to guide you in your investment decisions in 2024 

If you’re looking for some guideposts to help you position your portfolio this year, you can let these three themes inform your investment decisions.

They include 1) protracted easing cycle for interest rates, 2) improving interest rate differentials that will support the Philippine peso, and 3) the opportunity to lock in long-term yields in bonds.

Ruben Zamora, Metrobank’s chief markets strategist, shared this with select clients recently at a briefing titled “2024 Philippine Market Outlook: Position for the Next Cycle” in one of the metro’s finest hotels.

Protracted easing cycle for interest

“There is going to be a protracted easing cycle for the US Fed and, therefore, the BSP. We think the BSP is going to follow the Fed, so they will wait before the Fed starts to cut rates,” said Zamora.

Metrobank released its inflation update earlier, saying that there is a “strong downward bias” for inflation, and thus the likelihood of rate cuts later in the year.

Improving interest rate differentials

He said Metrobank believes the overnight interest rate differential, which is at 100 basis points (bps) now, could widen temporarily before ending the year back at 100 bps differential by the end of the year as the BSP and the Fed carry out their easing cycle.

“This is because the timing of the cuts will be on two different speeds, where the BSP policy rate may hold their policy rate steady while the Fed cuts theirs. This has historically been good for the peso. What’s also been good for the peso historically is the rate differential between the 10-year Treasury which we think will widen from current levels and the nominal 10-year peso bond rate which remains elevated,” he said.

“That’s supportive of the peso, so by the end of the year, we’re going to be looking at a slightly lower dollar-peso,” Zamora added.

Opportunity to lock in long-term yields

Recently, the Bureau of the Treasury (BTr) launched the Retail Treasury Bonds (RTB) 30 for the funding requirements of the government. It has a five-year tenor with an interest rate of 6.25% per year.

Zamora said this is the perfect time to lock in these higher yields, considering that rates will go down soon.

“The government borrowings, in absolute terms, are tapering, but we do have some potential for that to taper even sooner,” said Zamora.

Some investors may participate in the bond exchange program to take advantage of this. Others may sell the bonds they hold in the secondary market towards the end of the new RTB public offer to maximize accruals.

If you wish to act on these insights, you may reach out to your investment counselor for assistance.

(Bookmark and visit Metrobank Wealth Insights at www.wealthinsights.ph daily for investment insights and ideas. If you are a Metrobank client, please get in touch with your relationship manager or investment specialist for assistance in accessing exclusive content. Not a client yet? Please sign up here so you can begin your wealth journey with us.)

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has won various communication awards for his work in helping companies and individuals communicate with purpose, clarity, and creativity. He also has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir.