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Peso GS Weekly: Local yield curve steepens post-BSP rate cut
Offshore players began to unload at the belly and back-end of the curve as the dollar remains resilient. Meanwhile, others load up on short-term securities due to scarce supply.
By Metrobank Local Currency Trading Department and Maria Christina Virtudazo
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WHAT HAPPENED LAST WEEK
The local government securities (GS) market opened weak despite liquidity being freed up by the maturity of the Fixed Rate Treasury Note 5-76, leading to a steepening of the GS curve.
On Oct. 16, the Bangko Sentral ng Pilipinas cut the key overnight rate by 25 basis points (bps), as widely expected. Some knee-jerk selling, however, was seen after the central bank released its updated inflation forecasts. The risk-adjusted inflation forecast for 2025 was adjusted higher to 3.3% from 2.9%, while the 2026 inflation forecast was updated to 3.7% from 3.3%.
With the USD/PHP exchange rate remaining elevated for most of last week, selling interest from offshore participants continued as they unloaded benchmark 5- to 20-Year bonds. Other institutional onshore accounts, howev