It was a light trading week for Peso Government Securities (GS), with market activity centered on the ongoing Retail Treasury Bond (RTB) 02-01 issuance. Aside from the fresh bond supply, rising yields amid inflation concerns continued to drive front-to-belly yields higher.
The week opened with modest trading activity, with some selling seen in the front end of the curve as investors positioned ahead of the RTB price-setting and public offer. This set the tone for most of the week, with light demand picking up yield premiums in FXTN 20-17 (5Y). At the Treasury bill (T-bill) auction, better demand was seen in the 182- and 364-day tenors. Average yields across tenors were still 4 to 10 basis points (bps) higher than the previous T-bills auction.
On Tuesday, the Bureau of the Treasury (BTr) set the coupon for the 2.5-year RTB at 6.875%, attracting strong initial demand and awarding PHP 84.9 billion out of PHP 188.6 billion in tendered bids. The result prompted selling in short-dated GS to free up liquidity, particularly as market bids were more attractive than the RTB exchange offer for some series. Meanwhile, FXTN 7-68 (3Y) outperformed, with yields declining 7.5 bps, as they adjusted closer to the new bond's coupon.
Activity remained relatively quiet on Wednesday and Thursday. At this juncture, local bonds tracked the bearish move in US Treasury yields, which approached their highest levels since 2002. Under pressure from higher offshore rates and a stagnant risk backdrop, local yields rose by 2.5 to 13.5 bps on Thursday’s close.
Local bonds saw some recovery early Friday, as US Treasury yields pulled back from elevated levels. Buying interest emerged in the belly of the Peso GS curve, particularly in FXTN 7-70 (4Y) and FXTN 20-17 (5Y), which accounted for most of the day's trading activity. However, profit-taking later led to a retracement in belly yields, leaving them nearly unchanged by the close. Further out the curve, the longer-dated FXTN 10-74 (10Y) underperformed, with yields rising 19 bps to 7.775%, resulting in steepening in this area of the curve.
Week on week, front-end tenors underperformed, with yields rising by as much as 17.9 bps, while the belly was only marginally weaker by 5 bps. Back-end BVAL yields outperformed, closing lower by as much as 34 bps on tight liquidity.
Philippine headline inflation settled at 7.2% in September, landing in the upper range of the Bangko Sentral ng Pilipinas forecast for the month and exceeding the 6.8% median forecast in a Bloomberg survey. The faster inflation—fueled by food and non-alcoholic beverages, utilities, and transport costs—could support expectations for further policy rate hikes in an effort to stem price increases.
On the supply front, the RTB 02-01 offer period continues into its second week, with an early closure expected given its smaller issue size relative to previous RTB offerings. Overall, the remaining months of 2026 are set to see up to PHP 430 billion in bond issuance, as outlined in the Bureau of the Treasury’s (BTr) recently released fourth-quarter borrowing plan.
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.
DANA LOUISE GERONIMO is an Investment Counselor at Metrobank under the Markets Advisory Division. She built her expertise through her previous roles as an Investment Specialist and as a Financial Markets Sector Management Trainee within the bank. Dana holds a Master’s degree in Industrial Economics from the University of Asia and the Pacific. Outside of work, she enjoys exploring different fitness centers and reading.
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.
