Peso GS Weekly: Rally in peso yields may have more legs
With lower-than-expected inflation in November and the cancellation of the auctions of the Bureau of the Treasury, we may see more demand for peso bonds at current levels.
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WHAT HAPPENED LAST WEEK
Yields of peso government securities (GS) continued their descent last week as buying demand for medium- to long-term bonds persisted.
The first catalyst for the rally was the strong auction participation for the reissuance of the 6-year benchmark bond, FXTN 7-68. The average printed at 6.099%, while the high was at 6.12%, which is near the bottom-end of market indications. The auction was 3x oversubscribed and the good reception spilled over onto longer-tenor bonds such as FXTNs 7-70 (7YR), 10-69 (9YR), 10-71 (10YR), and 20-23 (15YR).
Short-dated GS, on the other hand, saw hefty profit-taking activity. Offshore players were seen unloading T-bills that they originally held alongside their short USD/PHP positions. With the USD/PHP and FX Swap markets moving higher be