PESO FIXED INCOME
What Happened: As expected, last week's Treasury Bill auction fetched lower rates compared to the previous auction after the slower than estimated inflation print for the month of September. Average yields for the 91-, 182- and 364-day bills fell to 2.995%, 3.171%, and 3.577%, respectively.
Total trading volume for the week amounted to just Php 50.3 B as most players remained on the sidelines, awaiting developments on the US-China trade talks. Week on week, yields on the belly to the long-end of the peso yield curve closed higher by 7-12 bps. Also, the 2-yr BVAL rate inched higher by 1 bp, while the 10-yr BVAL rate rose by 6 bps from the previous week.
What We Expect: Market players will look to the Bureau of Treasury (BTr) 5-yr bond issuance (FXTN 5-76), where it is expected to price between 4.25% to 4.50%. Yields could trade higher, tracking the movement of US Treasuries, from optimistic trade headlines from the US and China.
DOLLAR FIXED INCOME
What Happened: The US Treasuries sold-off following progress from the US-China trade talks. Some analysts, however, noted that tensions are unlikely to ease as economic risks continue to linger.
The FOMC minutes did not show anything new, with officials split on the path of monetary policy. Fed Chair Powell said in a speech that the Fed is leaving the door open to another cut after the weak manufacturing and services data last week.
Week on week, US Treasuries sold-off by 18-21 bps across the curve on strong risk-on tone. The 2-, 5-, 10-, and 30-yr Treasuries closed higher at 1.591%, 1.554%, 1.729%, and 2.194%, respectively. The 3-month/10-year Treasury curve turned positive for the first time since July, showing that worries of a recession have decreased considerably.
On ROPs, yields sold-off in line with the US Treasuries but were tighter against the benchmarks. The 5-, 10-, and 25-yr ROPs rose by 3, 11, and 10 bps to 2.03%, 2.27%, and 2.73%, respectively.
What We Expect: This week, market players will take cue from US retail sales data, industrial production data, and details of the US-China trade talks.