Rates & Bonds 2 MIN READ

Peso GS: What’s our game plan?

Just like the frenzy caused by the FIFA World Cup in Qatar, there’s excitement brewing over the recent trading gains of bond investors. New opportunities have sprung, and, with the flattening yield curve, it is a good time to take a look at them.

December 5, 2022By Metrobank Government Securities Trading Desk
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Football fans all over the world have been going crazy over the latest World Cup games, while bullish bond investors are on a similar high over their recent trading gains.

In the past few weeks, better buying interest ensued in the peso government securities (GS) market as it tracked moves lower in US Treasury yields, with the US Federal Reserve recently signaling a downshift in their hiking cycle as early as this month.

The strength of the recent auction for the 20-year Fixed Rate Treasury Note (FXTN) 20-14 has also added to the already growing appetite for risk among players in the peso GS space. Buying interest spilled over to other medium- to long-term bonds, which led the local yield curve to flatten significantly month-on-month.

A flat yield curve means short and long-term bonds offer equivalent yields, so the investor does not gain any excess compensation for the risks associated with holding longer-term bonds.

Entry Levels

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Rates & Bonds 2 MIN READ

What’s next for the peso GS market?

With the changing scenario in the yield curve, where long-term rates are decreasing more quickly than short-term rates, it may be time for you to tweak your fixed income portfolio.

December 2, 2022By Metrobank Government Securities Trading Desk
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The recent rally in peso government securities (GS) showed us that end-clients are still flush with liquidity.

The yield curve bull-flattened, a scenario in which long-term rates are decreasing more quickly than short-term rates, as demand poured into the recent 20-year issuance, which coincided with the rally in US Treasuries.

With the upcoming PHP 300-billion maturity in mind, on top of year-end demand, we believe that the peso GS market still has room for another rally. With this window of opportunity, we suggest taking profit on 10-year bonds that were bought in light of the desk’s previous trade plan, reinstating positions in Fixed Rate Treasury Note (FXTN) 20-14, as well as 12- to 20-year bonds, which provide better relative value.

Entry Levels

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Rates & Bonds 3 MIN READ

Globe Telecom: Dominating the local telecommunications industry

Globe Telecom Inc. is the market leader in the Philippine telco industry with decades of expertise and leading capital investments.

November 17, 2022By Metrobank
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Given the overall level of yields, we look for bonds with good relative value for additional yield pickup. We see opportunity in the Philippine telecommunications Industry, led by the PLDT-Smart and Globe, which has seen their bonds trade incongruently with their market positioning.

For QIBs looking for high-yield placements, we shine a spotlight on GLOPM 2.5 30.

Bond Details:

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Rates & Bonds 2 MIN READ

Post-Halloween opportunities in peso government bonds

As some investors sell off because of defensiveness of the market, new opportunities have sprung up for clients who want to tactically position in peso government securities.

November 16, 2022By Metrobank Government Securities Trading Desk
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Halloween is over. Yet the market continues to be spooked by several factors that ultimately point to higher yields.

Despite this spooky atmosphere, several opportunities have emerged for clients who want to tactically position in government securities.

Short-dated bonds like RTB 3-10 (3-month), FXTN 5-75 (4-month) FXTN 7-58 (5-month), and RTB 10-4 (9-month) have adjusted significantly higher as they re-align with higher policy rates – making them more viable short-term investment alternatives.

Three-year bonds are currently trading near the 6.40-6.60% area, while 10-year bonds are hovering near 7.30-7.50%.

With yields in these tenor buckets fast approaching their 2018 highs, investors may start to tactically position near the entry levels indicated in the table below.

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Rates & Bonds 2 MIN READ

Investing in bonds: The need for relevant, timely research

Sound investment decisions are built on valuable, unassailable research, which, if you get hold of in a timely manner, can help you preserve or better manage your wealth.

November 4, 2022By Anthony O. Alcantara
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Any savvy and experienced global bond investor would want to have the latest and most reliable information before making investment decisions.

Mark Benedict Tan, Head of Metrobank’s Credit Trading Department, said banks need to continuously innovate to provide sound advice and credible research to clients on potential investments.

“Clients may have financial advisors who give them ideas. But it is also important for clients to have access to rigorous and unbiased credit research to empower them to make wise investment decisions,” said Tan.

Award-winning partner

For Metrobank, it has CreditSights as a third-party research provider. CreditSights is an award-winning global credit market research provider owned by the Fitch Group, a credit ratings and research behemoth. CreditSights covers 5,000 companies, which represent 56 countries.

Metrobank is the first partner of CreditSights in the country.

“Because of our partnership with CreditSights, the Bank and our clients will now have access to credit information and analysis on various issuers throughout the world. These are updated regularly as news and earnings come out,” said Tan. “It also helps that they don’t take positions in the companies or institutions that they cover. That makes their analysis unbiased in a way.”

Complementary strengths

Metrobank clients can now easily access this valuable research through Metrobank’s Wealth Insights, a website with content to help high-net-worth clients protect and grow their wealth.

“Right now, Metrobank clients can access up to 50 credit profiles prepared by CreditSights in Wealth Insights, which they may use to do further research on ideas suggested by the bank,” said Tan.

“We also want to help our clients expand their investment universe. Clients can expect the bank to offer more new names in the coming months.”

Exclusive access to Wealth Insights

Select credit profiles from CreditSights are available in Wealth Insights at the link here.

If you are a client and still don’t have access to this exclusive content, please get in touch with your relationship manager or investment specialist so you can sign up for Wealth Insights.

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and 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.

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Rates & Bonds 4 MIN READ

New opportunities for these top 5 bond picks

For hold-to-maturity investors, there are five bonds to consider as they rebalance their portfolio and take advantage of the opportunities amid continuing volatility.

October 12, 2022By Patty Membrebe
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With yields rising to levels last seen in 2018, we think that it is an opportune time to reinstate positions in peso government securities. This recent cheapening has been driven by several factors.

First, inflationary pressures are proving to be stickier both in the global and domestic markets. As a result, central banks have embarked on a steeper trajectory of rate hikes than initially expected, and investors have adopted a more cautious strategy in anticipation of higher rates.

Second, the persistent weakening of the peso isn’t helping either. With a weaker local currency, peso bonds are becoming less attractive, especially to foreign investors. We think that there could be more room for the peso to weaken through 2023, and that the Bangko Sentral ng Pilipinas (BSP) may continue with their outsized rate hikes to help combat imported inflation.

These catalysts have all contributed to a sell-off and a weaker appetite for peso government securities.

However, we still see some opportunities, as buying demand from investors is expected to emerge at attractive levels that will keep peso yields supported. Here are our top picks and target yields:

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Rates & Bonds 1 MIN READ

Metrobank starts offer of minimum PHP 10 billion, 5% fixed rate bonds

From October 6 to 19, Metrobank will be offering its fixed rate bonds with a tenor of one and a half years, with a minimum investment amount of PHP 500,000 and additional increments of PHP 100,000.

October 7, 2022By Metrobank
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Metropolitan Bank & Trust Company recently announced the offering of peso-denominated SEC registration-exempt fixed-rate bonds in an aggregate principal of PHP 10 billion, with an option to upsize.

The bonds will have a tenor of one and a half years and an interest rate of 5.0% p.a., payable quarterly, with the minimum investment amount at PHP 500,000 and in additional increments of PHP 100,000. The offer period will run from October 6 to 19, 2022.

The bonds are intended to be issued and listed on the Philippine Dealing Exchange on October 28, 2022.

Proceeds will be used for general working capital needs.

First Metro Investment Corporation (FMIC), ING Bank N.V., Manila Branch (ING), and Standard Chartered Bank (SCB) are the joint lead managers and joint bookrunners of the offer. Metrobank, together with FMIC, ING, and SCB, are the selling agents of this issuance.

The issuance is part of Metrobank’s increased PHP 200.0-billion Bond and Commercial Paper Program, as approved by its board of directors last December 15, 2021.

Interested investors may visit any Metrobank branch or contact any of the Selling Agents.

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Rates & Bonds 2 MIN READ

Hyundai Capital America: Strong results despite global chip shortage

While the car industry still reels from a dearth of chips, Hyundai Capital America has found a way to minimize the impact on its business.

September 14, 2022By Metrobank
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If you are a qualified individual buyer (QIB) looking for short-term placements with a decent yield pick-up, you may consider Hyundai Capital America (HCA), a global leader in automotive financing.

It has shown strong second quarter 2022 financial results, with core automotive segment posting a 58% increase in operating profits and 16% increase in revenues year-on-year.

This despite a global shortage in chips used in cars. The rosy results can be attributed to optimized net pricing, a shift toward SUVs, and favorable foreign exchange rates.

Hyundai Motor Group, its parent company, grew its global market share, excluding China, to 11% in 2021 vs 8% in 2010. Its US market share also grew from 7.5% in 2016 to 10% in 2021.

We also like that its credit rating is aligned with Hyundai Motor due to existing support agreements that have no expiry date. The parent is required to own 100% of HCA either directly or indirectly and make cash contributions to HCA if the stipulated credit metric (fixed charge coverage ratio) deteriorates below a specified level (1.10x)

Bond details

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Rates & Bonds 3 MIN READ

Should you buy the new 5.5-year retail bonds?

With the “flattening” of the peso yield curve, it may be time to consider the new retail treasury bonds offered by the Bureau of the Treasury.

August 25, 2022By Patty Membrebe
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(UPDATE: Since its first day of trading in the secondary market, the yield of RTB 5-16 has traded higher from its coupon of 5.75% to 6.345% now, based on the indicative offer yield as of Sept. 14, 2022. This is as investors sold off the 5.5-year bond to trim risk positions in this tenor bucket, in anticipation of even bigger rate hikes by the BSP, and in turn, higher yields. With the yield pick-up of over 50 basis points in one week, we think that RTB 5-16 is a good buy at current levels, particularly at 6.30% or better.)

The government recently offered retail treasury bonds called RTB 5-16. With a tenor of 5.5 years and a coupon rate of 5.750%, these bonds may be a good addition to your portfolio.

Here’s why.

RTB 5-16 versus shorter-term bonds

As the Bangko Sentral ng Pilipinas (BSP) has signaled further rate hikes for the year, we continue to expect a “flattening” of the peso yield curve. This means the yields of short-term bonds are becoming much closer to the yields of long-term bonds.

This is not usually the case because when you tie up your money for a longer time in an investment, the yield or return is us

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Rates & Bonds 3 MIN READ

It’s time to take profit on 7- to 10-year peso government securities

If you have taken advantage of the 7- to 10-year bonds last month, you may now take profit to lock in your gains.

August 1, 2022By Patty Membrebe
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In our previous article about our trade plan titled “Go for the “sweet spot”: Buy 7- to 10-year bonds”, we recommended a tactical buy on 7- to 10-year peso government securities.

Now is an opportune time to take profit. These bonds have seen a significant pick-up in price, with yields lower by around 90 basis points (bps) month-on-month. The recent rally is due to investors’ hefty demand for new, longer-dated bond issuances, in the Bureau of the Treasury (BTr)’s weekly auctions.

Yields may be close to peaking

Although some follow-through buying may still be observed in the near-term, we think that yields in the 7- to 10-year space may be nearing their resistance levels, given the sharp drop in yields in the past few weeks.

If you were one of those who were able to capitalize on the trade plan released the previous month and bought 7-year and 10-year bonds with yields near the 6.75% and 7.20% area, respectively, you may now look into taking profit from your positions and lock-in gains of around 85-95 bps.

Reinstate positions at better levels

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