PESO FIXED INCOME
MARKET REVIEW: The Btr successfully awarded the re-issued 10-yr bond at an average yield of 4.196%, within market estimates of 4.15%-4.25% with 3.25x oversubscription.
Optimism over deeper rate cuts sustained demand for government papers which initially brought yields lower during the week. Post 10-yr auction, local bond yields retraced higher as sellers took advantage of the sharp decline in yields. At the end of the week, yields on the 10 and 2-year benchmark rates rose by 3bps to 4.40% and 3.89%, respectively.
MARKET OUTLOOK: Short term Treasury bill rates are inclined to adjust lower following easing on policy. Secondary market to trade the range local bond market takes its cue from local and global developments.
DOLLAR FIXED INCOME
MARKET REVIEW: The US Treasury market started the trading week with a sharp decline in yields due to political unrests in Argentina and Hong Kong. Yields retraced higher mid-week after US President Trump mentioned that the delay on the 10% tariff on additional Chinese goods. However, a sharp reversal was seen towards the end of the week on weak Chinese and European economic data. The 10-yr UST yield dropped below the 2-yr UST yield for the first time since 2006, exacerbating fears of US recession. At the week’s close, the 2-, 5-, 10-, and 30-yr UST yields decreased 17bps, 16bps, 19bps and 22bps W/w, respectively. In the local front, ROPs continued to track movements of UST yields supported by the hunt for yield. The 2-, 5-, 10-, and 25-yr went down by 15bps, 17bps, 14bps and 21bps to 2.26%,2.10%,2.16% and 2.65% W/w, respectively.
MARKET OUTLOOK: We expect some consolidation in bond prices on profit taking and defensive positioning until the Jackson Hole Symposium on August 26. Investors will be anticipating on US Fed Chair Powell’s speech for the Fed’s policy direction.