What’s next for the peso GS market?
With the changing scenario in the yield curve, where long-term rates are decreasing more quickly than short-term rates, it may be time for you to tweak your fixed income portfolio.
The recent rally in peso government securities (GS) showed us that end-clients are still flush with liquidity.
The yield curve bull-flattened, a scenario in which long-term rates are decreasing more quickly than short-term rates, as demand poured into the recent 20-year issuance, which coincided with the rally in US Treasuries.
With the upcoming PHP 300-billion maturity in mind, on top of year-end demand, we believe that the peso GS market still has room for another rally. With this window of opportunity, we suggest taking profit on 10-year bonds that were bought in light of the desk’s previous trade plan, reinstating positions in Fixed Rate Treasury Note (FXTN) 20-14, as well as 12- to 20-year bonds, which provide better relative value.