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Peso GS Weekly: Investors stay cautious about the BSP rate decision
At current levels, take profit from longer-tenor bonds and shift to the belly of the curve.
By Metrobank Local Currency Trading Department and Maria Christina Virtudazo
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WHAT HAPPENED LAST WEEK
It was a choppy session last week as players digested the local inflation print release and grappled with a volatile global bond market. Initially, the week started out on a positive note, with local yields trading 5-7 basis points (bps) lower as it traced the move lower in US Treasury yields. However, the rally was met with a hotter-than-expected local Consumer Price Index (CPI) print, which came out at 4.4% vs the 4.1% year-on-year expectation.
The higher-than-expected inflation print – combined with comments from the Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. who said that the previous forecast of an August cut is less likely to occur – led to a sell-off in the local bond market. As such, yields ended the day higher by around 7 bps, erasing all gains m