Government Securities
The Bureau of Treasury rejected all bids for last Tuesday’s 7-year Treasury Bond re-issue. Due to the paper’s illiquid nature and the lack of interest in the shorter tenors, market players submitted high bids, which the BTr was forced to reject. Had the BTr made a full award, yields would have fetched an average of 5.334%, much higher than the 5.15% PDST-R1 that morning. Total tenders amounted to only P5.965 billion.
Tired of all the financial terms, click here to learn more about this week's Track Beauty, Nikoleta Kyriakopoulou Νικολέτα Κυριακοπούλου
Market reaction to the release of slower-than-expected May 2012 headline inflation was minimal. Announcements of a possible scrapping of PSALM-specific borrowings by the BTr, the rejection of the bond auction, and the unexpected 25 bps rate cut in Chinese interest rates spurred secondary market rates lower the rest of the week. Higher GDP forecasts for the Philippine economy could have attracted some “hot money” flows, as shown by the appreciating Peso. From 6.08% on Monday, FXTN 20-17 reached a low of 5.9175% on Friday afternoon. The 24-year FXTN 25-8, meanwhile, shed 5 bps to cap the week at 6.1525%.
The slight downward shift in the longer end of the curve resulted into a flatter yield curve week-on-week, with the difference between 2- and 20-year debt at 306 bps from 314 bps the week earlier. Total weekly volume for the GS market amounted to P81,225.19 million – the biggest in one month’s time.
Foreign Exchange
After some weakness on Monday due to the release of weaker U.S. and Chinese economic data (P43.475, -0.075), the Peso strengthened against the U.S. Dollar throughout the rest of the week on (1) expectations that European leaders will “address the euro debt crisis” through a fiscal union and aid for Spanish banks, (2) better-than-expected Australian 1Q 2012 GDP, (3) and anticipation of further policy easing by the U.S. Fed and the ECB. The Peso closed at P43.16 (+ 0.06) against the Dollar on Thursday, gaining a total of P0.24 in the first four days of trading.
However, Bernanke’s omission of additional stimulus dampened the market’s mood on Friday, overshadowing the surprise move by the Chinese Central Bank.
Stock Market
The Philippine Stock Exchange index (PSEi) mirrored the direction of the USD-PHP spot market. The main index fell 172.24 points (4,890.20) on Monday, before gaining on the subsequent days, breaching the 5,000-point barrier on Thursday’s close (5,022.95, + 56.37).
Rates Forecast
Budget data will be released next week 15 June, after the Monetary Board meeting on Thursday afternoon. Budget data will have minimal effect on secondary market rate direction, as government stays way below its deficit cap for the year, despite accelerating spending. The country’s current monetary policy seems appropriate, in light of better-than-expected 1Q 2012 GDP data and benign inflation. Hence, the Monetary Board is expected to keep benchmark interest rates unchanged. The release of the BTr’s Q3 2012 borrowing program could also prove pivotal, especially if it jacks up its total borrowings to fund the PSALM requirement.
As always, developments abroad could dictate sentiment-driven local trading, especially as the crucial Greek election draws near. Considering the aforesaid factors, secondary market yields could move sideways with a downward bias.
Sources: Business World, PDEX, Philippine Daily Inquirer, Bloomberg
The Bureau of Treasury rejected all bids for last Tuesday’s 7-year Treasury Bond re-issue. Due to the paper’s illiquid nature and the lack of interest in the shorter tenors, market players submitted high bids, which the BTr was forced to reject. Had the BTr made a full award, yields would have fetched an average of 5.334%, much higher than the 5.15% PDST-R1 that morning. Total tenders amounted to only P5.965 billion.
Tired of all the financial terms, click here to learn more about this week's Track Beauty, Nikoleta Kyriakopoulou Νικολέτα Κυριακοπούλου
Market reaction to the release of slower-than-expected May 2012 headline inflation was minimal. Announcements of a possible scrapping of PSALM-specific borrowings by the BTr, the rejection of the bond auction, and the unexpected 25 bps rate cut in Chinese interest rates spurred secondary market rates lower the rest of the week. Higher GDP forecasts for the Philippine economy could have attracted some “hot money” flows, as shown by the appreciating Peso. From 6.08% on Monday, FXTN 20-17 reached a low of 5.9175% on Friday afternoon. The 24-year FXTN 25-8, meanwhile, shed 5 bps to cap the week at 6.1525%.
The slight downward shift in the longer end of the curve resulted into a flatter yield curve week-on-week, with the difference between 2- and 20-year debt at 306 bps from 314 bps the week earlier. Total weekly volume for the GS market amounted to P81,225.19 million – the biggest in one month’s time.
Foreign Exchange
After some weakness on Monday due to the release of weaker U.S. and Chinese economic data (P43.475, -0.075), the Peso strengthened against the U.S. Dollar throughout the rest of the week on (1) expectations that European leaders will “address the euro debt crisis” through a fiscal union and aid for Spanish banks, (2) better-than-expected Australian 1Q 2012 GDP, (3) and anticipation of further policy easing by the U.S. Fed and the ECB. The Peso closed at P43.16 (+ 0.06) against the Dollar on Thursday, gaining a total of P0.24 in the first four days of trading.
However, Bernanke’s omission of additional stimulus dampened the market’s mood on Friday, overshadowing the surprise move by the Chinese Central Bank.
Stock Market
The Philippine Stock Exchange index (PSEi) mirrored the direction of the USD-PHP spot market. The main index fell 172.24 points (4,890.20) on Monday, before gaining on the subsequent days, breaching the 5,000-point barrier on Thursday’s close (5,022.95, + 56.37).
Rates Forecast
Budget data will be released next week 15 June, after the Monetary Board meeting on Thursday afternoon. Budget data will have minimal effect on secondary market rate direction, as government stays way below its deficit cap for the year, despite accelerating spending. The country’s current monetary policy seems appropriate, in light of better-than-expected 1Q 2012 GDP data and benign inflation. Hence, the Monetary Board is expected to keep benchmark interest rates unchanged. The release of the BTr’s Q3 2012 borrowing program could also prove pivotal, especially if it jacks up its total borrowings to fund the PSALM requirement.
As always, developments abroad could dictate sentiment-driven local trading, especially as the crucial Greek election draws near. Considering the aforesaid factors, secondary market yields could move sideways with a downward bias.
Sources: Business World, PDEX, Philippine Daily Inquirer, Bloomberg
No comments:
Post a Comment