PESO FIXED INCOME
MARKET REVIEW: Local peso yields moved upward last week, tracking the movement of US Treasuries. However, better than expected inflation data tempered the rise in yields. Volume for the week was lighter than average at just Php 67 Bn, as bids pulled back due to strong selling pressure. Yields ended the week higher by an average of 15 bps across the curve. Week on week, the 2- and 10-yr BVAL rates rose by 0.3 bps and 12.0 bps, respectively.
MARKET OUTLOOK: Yields should continue its upward trend, as global risk sentiment improves, and as local market players continue to unload positions before the BSP’s policy meeting on September 26.
DOLLAR FIXED INCOME
MARKET REVIEW: US Treasury yields closed higher by 3.5-6.5 bps week on week, with the 2-, 5-, 10- and 30-yr benchmarks at 1.540%, 1.433%, 1.560% and 2.025%, respectively. This was due to improved global sentiment that led to a sell-off in safe-haven assets. Hong Kong leader, Carrie Lam, withdrew the controversial extradition bill that triggered months of protests; and the US and China agreement on renewed trade talks in early October.
Locally, ROPs (US dollar denominated Philippine bonds) continued to track the movement of US Treasuries. Week on week, yields increased by 3-4 bps to 2.04%, 2.16% and 2.65% for the 5-, 10- and 25-yr ROPs, respectively
MARKET OUTLOOK: US inflation, retail sales and consumer sentiment headline the data releases for the week. Market players will look at these indicators to gauge the strength of the US economy before the FOMC (Federal Open Market Committee) meeting on September 18. Chances of a 25-bp rate cut in the Fed’s September meeting went up to 95.9%, vs. the 83.7% the previous week.