Government Securities
The Bureau of Treasury awarded last Tuesday’s Treasury Bond auction in full. The newly issued 5-year paper fetched a coupon rate of 4.625%, a bit lower than the prevailing secondary market rate for outstanding securities of the same tenor. Total tenders for the fully awarded P9.0 billion offer amounted to P28.049 billion.
Secondary market yields dropped dramatically last week, as (1) S&P upgraded the Philippines’ sovereign debt rating to BB+, (2) expectations of tame June 2012 inflation, (3) signals of monetary easing by Chinese and European policy makers. GS market rates fell to its lowest levels in four months, as both domestic and foreign financial institutions went on a buying spree. Yields for FXTN 20-17 hit a low of 5.59% on Thursday morning, down from a high of 5.8695% on Monday. Likewise, the 25-year FXTN 25-8 shed 35 bps to trade at 5.70% as 10-year papers fell by an average of 10 bps.
Once the effects of the aforesaid factors waned, market rates rose by an average of 7bps as the week drew to a close. Total weekly volume for the secondary GS market amounted to P251 billion, the largest weekly tally this year.
Foreign Exchange
S&P’s credit upgrade, release of benign inflation data, and expectations of monetary stimulus in China and in Europe boded well for the Philippine Peso. The local currency strengthened to P41.68 against the U.S. Dollar on Thursday’s close, gaining a total of P0.44 since Monday. Total weekly turnover for the USD-PHP spot market amounted to $4,992.27 million.
Stock Market
Likewise, the PSEi reached an all-time high of 5,369.98 (+ 15.26) on Thursday due to the aforesaid factors. The main index rose by a total of 123.57 points in the first four days of trading. There were some profit taking prior to the U.S.4th of July holiday and the ECB meeting on Thursday, but the local equities market exhibited vigor throughout most of the week. The PSEi capped the week at 5,362.68 (-7.30). Total weekly volume for the main index amounted to P32.38 billion.
Rates Forecast
Traders interviewed by Business World predict a 5-10 bps decline in this Monday’s T-Bill auction rates on (1) benign inflation data and (2) the recent credit upgrade by S&P. The 91-, 182- and 364-day bills last fetched average yields of 2.174%, 2.274%, and 2.45%, respectively.
General market sentiment could be dampened by renewed concern on U.S. jobs data and disappointment on European efforts to deal with its crisis. However, there are no local upward pressures for interest rates, amidst tame inflation and a negligible budget deficit. In light of the two-week GS rally, secondary market rates could take a breather in the meantime.
Sources: Business World, PDEX, Philippine Daily Inquirer, Bloomberg
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