PESO FIXED INCOME
MARKET REVIEW: Local bond yields traded sideways with some sellers reducing position ahead of the Lenten break. Yields continue to retrace on the back of thin liquidity but volume remained relatively light. At the week’s close the 10-yr BVAL benchmark rate rose 10bps to 6.06%, while the 2-year benchmark rate rose 4bps to 5.97%, week-on-week.
MARKET OUTLOOK: Markets will remain defensive awaiting for more direction guided by the 20-year auction result.
DOLLAR FIXED INCOME
MARKET REVIEW: UST Treasuries were initially muted following disappointing quarterly earnings results. USTs then sold-off after Empire manufacturing printed stronger at 10.1 versus 8.0 expectations. However, UST yields reversed its course fuelled by weak manufacturing data in Europe and US. At week’s close, the 2-, 5- , 10- and 30-yr USTs yields decreased by an average of 1bp. In the ROP space, market saw marginal selling which caused bond prices to drift lower. The 2-, 5, 10- and 25-yr closed higher by an average of 3bps week-on-week.
MARKET OUTLOOK: We expect the US Treasury to consolidate up until next week with data and event calendars relatively thin. Consensus forecast for the US GDP in the first quarter to grow by 2.2%. Near-term support levels for US Treasuries remain at 2.60% for the 10-year and 3.10% for the 30-year. We continue to observe inversion in the short-end of the yield curve, with the 2-year yield [2.38%]. The upcoming US GDP data and an FOMC meeting may offer guidance if this condition will persist. The rest of the yield curve is showing a normal, upward-sloping curve. Low interest rates in other major markets [Japan, Germany, and UK and yield] continue to lend value to US government bonds. This backdrop is expected to sustain bids for ROPs and other emerging market bonds in the coming week.