PESO FIXED INCOME
MARKET REVIEW: Although BSP Governor Diokno announced that monetary easing could come as soon as this month amid benign inflation, yields still ended higher week on week by 6-10 bps for bonds in the short-end and by 15-20 bps for bonds in the belly to long-end. The local bond market mirrored the movements of US Treasuries this week, with yields soaring to their highest levels in three months.
MARKET OUTLOOK: Yields should move sideways with an upward bias this week, as market players wait for clear drivers globally and locally, with the Fed’s FOMC meeting next week and the BSP’s Monetary Board meeting the week after.
DOLLAR FIXED INCOME
MARKET REVIEW: The global fixed income market was marked by sell-off in bonds and risk-on sentiment driven by optimism in US and China trade. Moreover, US data for the week were better than expected, with core CPI for the year printing at 2.4% versus the 2.3% estimates, and retail sales outperforming market expectations, printing at 0.4% for the month of August. Consumer sentiment also surprised on the upside at 92.0 versus the 90.8 estimates. Week on week, yields rose substantially, with the 2-yr benchmark up by 26 bps at 1.800%, and the 5-, 10-, and 30-yr benchmarks up by 32-35 bps at 1.751%, 1.896%, and 2.371%, respectively.
Locally, ROP yields continued to track the movement of US Treasuries. Week on week, yields for the 2-yr ROP rose by 9 bps to 2.16%, while yields for the 5-, 10-, and 25-yr ROPs rose by 12-14 bps to 2.18%, 2.30%, and 2.77%, respectively.
MARKET OUTLOOK: All eyes will be on the FOMC meeting on September 18. Although market players are already expecting a 25 bp cut on the Fed’s monetary policy, they will look for clues from the Fed’s dot plot and Fed Chair Powell’s press conference. With at least three more rate cuts priced in by the end of 2020, yields could continue its upward trend if the Fed would be less dovish than expected. Other data highlights for the week include industrial production, housing starts, and existing home sales.