Peso bonds trading expected to pick up steam

MANILA, Philippines - Trading in peso-denominated bonds is expected to pick up steam in the fourth quarter amid a growing economy and falling prices of unprocessed food and energy.

“We expect a fourth quarter rally in peso-denominated bonds amidst stronger Philippine economic performance, falling domestic inflation rates, and the continuing appeal of US Treasuries given its economy’s robust growth,” according to the MarketCall, a joint publication of First Metro Investment Corp. and University of Asia and the Pacific (UAP).

FMIC-UAP expects inflation to ease in the last quarter of the year with the lifting of the seven-month old ban on cargo trucks that had been blamed for the congestion at the Port of Manila.

“Removal of supply chain constraints (with the lifting of Manila’s truck ban), huge rice imports, greater impetus to move international goods shipments to Subic and Batangas, and falling crude oil prices underpin our optimism that inflation will significantly slow down in the fourth quarter,” the report said.

FMIC-UAP said “ a likely pause” in the central bank’s tightening cycle would likewise contribute to more risk appetite.

“Faster second half economic growth, with renewed government spending and stronger exports, should infuse greater optimism in the local financial markets,” it said.

The local currency bond market rose 8.8 percent to P4.49 trillion in the second quarter, mainly driven by increases in both government and corporate bond issues.

The government bond market comprises fixed-income instruments issued by the government and government-owned entities.  These include Treasury bills and bonds.

As of the end of June this year, outstanding fixed-income instruments issued by the government amounted to P3.82 trillion, up 6.5 percent year-on-year.