Peso Government Securities (GS) traded on the back foot last week as developments in the Middle East, expectations of US Federal Reserve (Fed) policy tightening, and fresh local bond supply drove investor repositioning.
Local bonds started Monday on a defensive note, as investors opted to keep positions light ahead of the week’s bond issuance. The 3Y and 5Y sectors led selling activity, pushing yields above the preceding week’s levels despite opportunistic buying. The regular Treasury Bill (T-bill) auction results reinforced weak market sentiment, with auction averages rising by 4 to 12 basis points (bps) across all tenors.
Trades in the belly continued through Tuesday, particularly in FXTN 7-68 (3Y) and 7-70 (4Y) ahead of the scheduled bond auction. At the FXTN 20-17 (5Y) re-issuance, the Bureau of the Treasury (BTr) fully awarded the PHP 30 billion offering, with an average yield of 7.438%.
Profit taking followed from successful bidders, leaving the newly auctioned series to close just 0.5 bp above the previous day’s close at 7.405%. Most benchmark yields closed within 2 to 3 bps, although FXTN 10-71 (7Y) outperformed at 6.5 bps lower day-on-day.
The local GS market saw temporary relief on Wednesday, as crude oil prices eased on news of US-Iran talks, and expectations of restored oil supply flow through Saudi Arabia’s East-West pipeline. Bond buying activity was most evident in follow-through buying of 20-17, which outperformed the midweek session at 8.5 bps lower.
The BTr announced the issuance of a new 2.5-Year Retail Treasury Bond (RTB), with an accompanying exchange offer on eligible GS with maturities up to March 2027. Market reaction to the announcement may remain subdued until firmer pricing details toward its offering date on September 29, 2026.
Meanwhile sentiment reversed on Thursday, as local bonds tracked weakness in global yields following strong US manufacturing and services data and hawkish statements from Fed policymakers. Risk-off positioning caused the 20-17 to underperform, with selling interest spilling over to nearby belly bonds. However, minimal movement was seen in the front and back-end sectors, and yields mostly closed 1 to 5 bps higher.
On Friday, market activity lightened as investors appeared to position ahead of the new 2.5-Year RTB issuance. Most of the day’s trading activity was again concentrated in the 4Y and 5Y tenors, with two-way flows keeping yields little changed at the end of the day.
Week-on-week, BVAL yields ended 2 to 13 bps higher across the curve, with underperformance in the 10-Year benchmark, followed by the front-end tenors.
Local bond investors turn their attention the RTB’s pricing on September 29, 2026. Some traders’ coupon estimates are within a 6.875% to 7.125% range, with the total expected issue size of PHP 150 to 200 billion. With the anticipated volume being smaller than previous RTB offerings and recently light local bond supply, the new bond issuance may draw strong market participation.
Elsewhere, cautious sentiment continues to hang over local and global bonds. Oil-price and weather-related inflation drivers may reinforce expectations of hawkish policies for both the Bangko Sentral ng Pilipinas and the Fed.
Note: Rates are indicative and subject to refresh.
For more information on Peso Government Securities, you may reach out to your Wealth Specialist or log in to Metrobank Wealth Manager.
Daniel Andrew Tan is an Investment Counselor at Metrobank’s Markets Advisory Division. He leverages his extensive background in retail banking and wealth management to deliver strategic investment advice and bespoke portfolio solutions to clients and stakeholders. He focuses on delivering timely and relevant advice to help navigate shifting financial landscapes with confidence. Outside of work, he stays up-to-date on economic and political developments via podcasts and other alternative media.
