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

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