Ahead of the New Year holidays last week, profit taking in medium term peso government securities (GS) ensued causing long-term yields to move slightly higher.
For short-term bonds, good buying and selling interest was seen as those looking for additional carry, notably offshore clients, were met by those looking to sell or free up liquidity.
Volume, however, was relatively low as some dealers and clients were out for the holidays. On a week-on-week comparison, yields were marginally changed to higher by 7.5 bps.
To start the week, profit taking activity persisted on the first trading session of the year with benchmark bonds in the 7- to 10-year bucket getting sold by dealers. Peso GS yields moved higher by as much as 14 basis points (bps). Investors were mostly on the sidelines, still waiting for new data and catalysts before positioning heavily.
From the lows seen in mid-December, 10-year bonds were higher by around 25 bps already with the peso yield curve steepening, i.e., long-term yields have moved higher relative to short-term yields.
Elsewhere, the Bureau of the Treasury (BTr) successfully awarded all three T-bill auctions with yields moving higher by 10-30 bps, with the 6-month paper underperforming the most.
Despite this, the 6-month T-bill saw the most bids and this allowed the BTr to increase the Non-Competitive bid awards bringing the total award size to PHP7 billion from PHP 5 billion previously announced.
We continue to recommend investors to stay nimble with GS positions, as we expect a jumbo offering to be announced ahead of the bond maturities occurring this March.
Local inflation data for December 2023 will be released this Friday, where Bloomberg consensus estimate is at 3.9%, or within the BSP’s target inflation band of 2-4%. A print within this target band was last seen in March 2022.
We also recommend investors to continue taking profit on rallies, and with the proceeds, opportunistically reposition in longer-term bonds through the Bureau of the Treasury’s (BTr) upcoming auctions for better value.
GERALDINE WAMBANGCO is a Financial Markets Analyst at the Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. She provides research and investment insights to high-net-worth clients. She is also a recent graduate of the bank’s Financial Markets Sector Training Program (FMSTP). She holds a Master’s in Industrial Economics (cum laude) from the University of Asia and the Pacific (UA&P). She takes a liking to history, astronomy, and Korean pop music.
