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Peso GS Weekly: Inflation slowdown fuels bond rally
The local bond market was boosted by slower inflation, expectations of lower policy rates, and strong demand for mid-term bonds ahead of new government debt issuance.
By Metrobank Local Currency Trading Department and Janssen Roman
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What happened last week
At the beginning of the week, market activity was subdued, with investors focused on managing their position.
Local bonds tracked the movement of US government bonds, but they underperformed in comparison. The government’s auction of Treasury bills showed weaker demand, with yields increasing by 6–15 basis points (bps) compared to previous results.
By mid-week, attention turned to the reissuance of a 5-year bond, 7-70, which saw strong participation and was priced at an average yield of 5.908%. Secondary market activity remained quiet, with bonds like 10-69 (7-year) and RTB 5-18 (4-year) were little changed, closing Wednesday’s trading at 5.995% and 5.810%, respectively. Bonds further out on the curve, such as the 14-year 20-23, ended at 6.250%, reflecting a 2.5-bp
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