PESO FIXED INCOME
MARKET REVIEW: The Bureau of Treasury fully awarded the re-issued 20-yr bond at an average rate of 5.015%. Total tenders were only PHP 29Bn, showing the market’s weak appetite for long-end securities. Post the 20-yr auction, two-way interest was seen on short-term papers as the yields on the front-end went down by as much as 20bps. Persistent demand for government securities was likewise fueled by the Fed’s decision to cut policy rate by 25bps. At the week’s close, the 10-yr BVAL benchmark declined 18bps to 4.58%, while the 2-year benchmark rate went down by 20bps to 4.31%, week-on-week.
MARKET OUTLOOK: Local bond yields may continue to trade lower as July CPI is expected to print at 2.3%, lower than the previous month. The Monetary Board is also expected to cut key policy rate by 25bps on its August 8 meeting.
DOLLAR FIXED INCOME
MARKET REVIEW: At the week’s close the 2-,5-,10- and 30-yr UST yields declined 14bps, 19bps 22bps and 21bps to 1.75%, 1.66%, 1.85% and 2.38%, w/w, respectively. This was on the back of the Fed’s 25bp rate cut, and US President Trump’s comments on imposing an additional 10% tariff on Chinese goods. ROPs followed the movement of the USTs with the 5-, 10- and 25-yr ROP yields decreasing by 7bps, 9bps, and 11 bps to 2.36%, 2.52% and 3.01%, w/w, respectively.
MARKET OUTLOOK: While the recent tweets from US President Trump has spurred massive risk off globally, the general trend in rates is lower for longer. ROP bonds are well supported that we expect profit taking to be met by demand from players who have been waiting to reposition in the ROP space.