Peso GS Weekly: Bonds react to inflation surprise

What happened last week

Last week began with quiet trading in the peso government securities (GS) space, as investors stayed cautious amid a lack of local catalysts. Benchmark bonds opened stronger, with yields 2–4 basis points (bps) lower, but profit-taking emerged by the mid-session—especially in the 5–10-year tenors— and slightly steepened the yield curve.

By mid-week selling pressure intensified, as global yields rose and the USD/PHP strengthened. The reissuance of the 7-year bond, 10-69, was fully awarded at 5.939%. The results were within expectations and failed to lift sentiment. Bonds in the belly of the curve sold off 2–4 bps higher, with duration names also under pressure.

The week ended with a stronger-than-expected August inflation data of 1.5%, triggering knee-jerk selling. Ho