PESO FIXED INCOME
MARKET REVIEW: Throughout the week, the local government securities yields continued to mirror the movements of US Treasuries. After the Fed cut its policy rate, local yields sold-off despite the fact that policy projections were leaning towards the hawkish side. In local news, BSP Governor Diokno had dovish comments, saying that a 25-bp cut to the local monetary policy could come next week, and that a 100-bp RRR cut is also in the horizon.
Total volume for the week amounted to just Php 67.8 Bn, as market players await BSP’s policy meeting next week. Yields rose on a week-to-week basis by an average of 11 bps for the active belly securities, while the 2- and 10-yr BVAL rates rose by 1.8 bps and 7.2 bps, respectively.
MARKET OUTLOOK: All eyes will be on the BSP’s monetary board meeting, where market players are expecting a cut on the policy rate. The expected 25-bp cut to the policy rate, in addition to the 100-bp RRR cut, should drive local yields lower, regardless of how US Treasuries would move, as this would increase liquidity in the market.
DOLLAR FIXED INCOME
MARKET REVIEW: The week started with a strong risk-off tone as two Saudi Arabia plants were targets of drone strikes, which stopped 5% of the world’s daily production of crude oil. Markets spiraled over the news, with the price of oil rising by up to 20% and investors flocking to safe-haven assets. However, the mood lightened after Saudi officials announced that oil production is set to come back quicker than expected.
US Treasury yields sold-off from their weekly lows due to the hawkish tone of the Fed and the dissent over the future path of monetary policy, with the short-end yields underperforming, given that they are more sensitive to Fed expectations.
Week on week, US treasuries were bull flatter, with the 2-, 5-, 10-, and 30-yr yields lower by 12, 15, 17, and 21 bps to close at 1.683%, 1.600%, 1.722%, and 2.162%, respectively.
Meanwhile, on ROPs, yields ended mixed week on week, but widened against the benchmarks after last week’s tightest levels. The 2-yr ROP yield rose by 1.1 bps to 2.17%, while the 5-, 10, and 25-yr ROP yields fell by 2.9, 2.2, and 6.2 bps to 2.15%, 2.28%, and 2.705%, respectively.
MARKET OUTLOOK: Market players will continue to be on the lookout for fresh leads on trade talks before the high-level negotiations resume next month. On data, reports on GDP, manufacturing and services PMI, personal income and spending, consumer confidence, and consumer sentiment are set to come out this week.