Market Situationer (13-17 August 2012) by Joboy Quintos

Government Securities
The newly issued 25-year FXTN fetched a coupon rate of 5.75% last Tuesday, which fell at the lower end of the market projections. Total tenders for the fully awarded P9.0 billion offer amounted to P26.26 billion.

Secondary market rates, particularly the longer dated securities, rose at the early parts of the week due to higher inflation expectations brought about by the recent flooding. FXTN 20-17 and RTB 20-1 peaked at 5.67% and 5.75%, respectively. The 20-year GS rose by an average of 10 bps from the closing rates on 10 August. The auction results and BSP statements that 2012 inflation would fall well within the 3-5% target somehow eased the selling pressure. As a result, rates for FXTN 20-17 dipped to 5.5925%, while RTB 20-1 fell to 5.65%.

Towards the end of the week, however, trading volumes thinned as the market approached the so-called “ghost month.” In addition, better than expected U.S. retail sales and housing permits resulted in a sharp increase in longer-dated U.S. Treasuries. Hence, demand for riskier assets like Peso-denominated securities declined, as shown by the P0.405 depreciation of the local currency against the U.S. Dollar. FXTN 20-17 closed the week at 5.685%, while RTB 20-1 ended the week at 5.72%.

The difference between 2- and 20-year debt rose to 318 bps from 309 bps the previous week. Higher rates in the longer end of the curve resulted into a steeper yield curve. Total weekly volume amounted to P74.16 billion, up from P31.706 billion.

Foreign Exchange
The U.S. Dollar strengthened against the Peso the entire week as the U.S. economy exhibited signs of recovery (higher-than-expected retail sales and housing permits). A stronger U.S. economy makes the prospect of another round of quantitative easing less likely. From P41.930 (-0.045) on Monday, the Peso capped the week at P42.42, depreciating by a total of P0.535 against the Dollar. Total weekly volume for the USD-PHP spot market amounted to $4,456.65 million.

Stock Market
The PSEi traded sideways with an upward bias in the first three days of trading, amidst an absence of major leads. The main index closed at 5,266.66 (+0.72) on Wednesday, before surrendering -47.15 points the next day (5,219.51) as market players cashed in profits ahead of the four-day weekend. The PSEi capped the week at 5,206.81. Total weekly volume of trades amounted to P21.06 billion.

Rates Forecast
Market players could again flock to the safety of shorter term Treasury Bills. However, foreign funds might shun Peso-denominated securities amidst the relatively higher U.S. Treasury rates and the recovery signs shown by the U.S. economy. Average yields for the Treasury Bill auction on Wednesday could move sideways with an upward bias, as a result. The 91-, 182-, and 364-day T-Bills last fetched average yields of 1.495% (- 30 bps), 1.795% (+ 32.2 bps), and 2.422% (+ 14.3 bps), respectively.

The bearish sentiment in local GS market might persist in the near-term.

Sources: Business World, PDEX, Philippine Daily Inquirer, Bloomberg

(Virtual) Reality: Growing up in the age of TV, Internet and Facebook

A couple of nights ago, we had dinner we some of my dad's first cousins. They were from another, shall I say, less technologically-endowed generation. They were quite appalled at the seeming disjointness of today's youths from the real world. The advent of the internet - of Web 2.0, social networking and Facebook - is the main culprit. They rued the fact that kids nowadays hardly play outdoors anymore, choosing to live quasi-anonymous online lives instead. Kids today tend to border on the sedentary, as they neglect physical activities in favor of the computer chair or the couch.

Frankly speaking, I can relate to both sides of the spectrum. My generation is old enough to remember the pre-Internet days - when kids actually go outside the house to play games. But then again, I'm young enough that instant messaging and social network comes quite naturally.

As kids growing up in the late 80's up to the mid-90's, my dad controlled our access to the ever tempting world of television, computer games and information technology. We weren't allowed to watch the boob tube during school days. On weekends, our TV viewing time was limited from 12 nn to late evening. My dad gave my brother and I obsolete computers to discourage us from playing the most popular computer games. Moreover, he staunchly refused to provide gaming consoles like the iconic Nintendo and Play Station.

Instead, my parents made available a wondrous endowment of books, music lessons and enrolled us into every imaginable summer sports clinic.

Of course, I resented those restrictions. I couldn't appreciate the limited TV time and uber-slow 2x86 computers. I had no other choice but pore over the multitude of books. In literature, I discovered a wealth of wonders. I developed a wild imagination where I used to daydream for hours at length. I wasn't overly enthusiastic with the repetitive piano lessons, but it did succeed in instilling musical appreciation. I did not appreciate the early swimming, tennis and basketball lessons at first, but in time, I developed an intrinsic love for track & field that persists until this very moment.

As we grew older, the restrictions loosened and eventually disappeared. By the time I was in college, I was pretty much free to do everything I want, in light of my new-found maturity. I still did not watch TV during weekdays, in light of the grueling demands of academics and athletics. But I did develop an above average proficiency for literature. I could express my thoughts eloquently in writing and in speech.

In time, I became thankful for my parents' unique style of upbringing.

In this day and age of convergence, broadband internet and Facebook, I am confident that I won't get lost in the proverbial technological jungle. There's always this danger of blurring of the lines between reality and virtual reality.

Now that I'm approaching quarter-life, I can say in honesty that I'm living a well-balanced life. Just like most of my peers, I'm pretty much connected through the use of Facebook, Twitter and Wordpress. I could spend hours tinkering with the aforesaid sites. More importantly, I remain well-connected with reality, having a vibrant social life and a multitude of athletic pursuits.

I absolutely love the ease of communication brought about by Twitter and Facebook. I maintain a detailed blog, sharing it to a multitude of people from all over the globe, thanks to the World Wide Web. But I make it a point not to live a life disjointed from what's real.

Real world interactions form the foundations of my online alter-ago.