Last week, the peso government securities (GS) market players saw the same factors that affected the price movement of peso GS.
Yields of peso GS trade initially traded within a tight range until the Bureau of the Treasury (BTr) awarded the new 10-year benchmark bond, Fixed Rate Treasury Note (FXTN) 10-72, at the coupon rate of 6.25%. Similar to the 7-year Dutch auction, total tendered bids reached over PHP 100 billion. This prompted the BTr to open its TAP facility for another PHP 5 billion which was later on fully awarded.
Buying interest was imminent but US yields inching higher due to the jam-packed economic data releases caused players to stay on the sidelines mid-week.
Before the week ended, stronger demand was seen with buying interest concentrated in 5-10-year bonds. Despite trading lower in yield versus medium-term bonds, buyers of longer-dated securities remain firm as bond supply remains scarce. Front-dated securities, however, underperformed as those initially holding these for carry were unloading them with the USD/PHP exchange rate touching new year-to-date (YTD) highs.
For the week, yields ended lower by 3-10 basis points (bps).
Market Levels (week-on-week)
The BTr will be reissuing FXTN 3-30 for its 3-year auction on Tuesday where our indicative range stands at 5.95 – 6.15%. With demand for short-dated securities not as strong as longer-dated securities, we recommend investors to bid at the higher end of our expected range.
For bonds in the 5-10-year space, we recommend to continue to take profit should a rally continue as we expect a Retail Treasury Bond (RTB) to be announced in February ahead of the March RTB maturities. Although no details are provided yet, we expect the tenor to be at least 5 years.
Later this week, market players will also receive the fourth quarter 2023 Gross Domestic Product (GDP) print where consensus is currently at 5.2%, slower than the 5.9% growth seen in the fourth quarter of 2022. Although we do expect the Bangko Sentral ng Pilipinas (BSP) to keep key rates unchanged in the first meeting of the year on February 15, any significant deviation in the GDP figures shall be taken into account by the BSP in their succeeding monetary policy decisions.
See the BTr’s first quarter auction schedule below to reinstate positions in long-term peso GS:
