PESO FIXED INCOME
MARKET REVIEW: Market players continued to reposition ahead of the RR cut implementation pushing 10 –yr. bond yields to its lowest since February 2018. Buying interest intensified after the 10-yr auction yielded an average of 5.66%, 31 bps lower compared to the auction last April. Week on week, local bond yields declined by as much as 10-15 bps across the curve. The yield curve steepened in the month as short-term rates outpaced the decline of longer-term bond rates. The 10-yr BVAL benchmark closed at 5.55% (down 39.5 bps mom), while the 2-year benchmark rate closed 5.53% (down 45 bps mom).
MARKET OUTLOOK: With more cuts expected in the coming months, the interest rates market will remain supported by fixed income investors. Rate easing from global Central Banks raise the probability of more accommodation from the BSP as inflation in the coming months decline further.
DOLLAR FIXED INCOME
MARKET REVIEW: A Risk-off sentiment dominated global markets this week. This was driven by the US- China trade war as well as the resignation of UK Prime Minister Theresa May creating uncertainty in Brexit. At the week’s close, UST yields with 2-, 5- , 10- and 30-yr tenors significantly declined by 14bps, 15bps, 15bps and 14bps W/w, respectively. ROPs tracked UST movement as the 2-, 5, 10- and 25-yr yields fell 1bp, 2bps, 2bps and 2bps W/w, respectively.
MARKET OUTLOOK: 10-Yr UST yield level is nearing its 2-Yr low of 2.04%. Any positive news that may allude to the US and China having a truce, may lead to a quick reversal of sentiment. US manufacturing data, payrolls and jobless claims will be monitored in the coming week.. With the announcement of a credit ratings upgrade for INDONs by S&P, ROPs may underperform versus INDONs due to better credit spreads of the latter.