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Philip Sov Curves Flattens, Spreads Tighten, Trade Balance Narrows

PHILIPPINES

The Philippines USD sovereign debt curve has bear-flattened today, yields are 10-15bps higher post US CPI. Earlier Philippines Trade Balance narrowed, while the unemployment rate dropped to 3.5% y/y from 4.5% y/y in Jan.

  • Post US CPI the 2Y yield is 15bps higher at 5.00%, 5Y yield is 17bps higher at 5.20%, 10Y yield is 17bp higher at 5.28%, while 5yr CDS is 2bp higher to 64bps
  • The Philip to US Treasury spread difference has tighten over the past week with the front-end & long-end are now at the tightest levels since June 2023, the belly of the curve lags with the 5-7yr area off YtD tights, the 2y is 4bps, the 5yr is 60bps, while the 10yr is 75bps.
  • Cross-asset moves: the USD/PHP is unchanged at 56.499, PSEi Index is 0.80% lower, Corporate Credit curve is 2-6bps higher over the week with better buying out past 5yr maturity, while US Tsys yields are flat to 3bps lower as the curve steepens.
  • ADB believes that the country's broader fiscal deficit outlook until 2028 remains acceptable if government spending prioritizes infrastructure and social services, and efforts to improve tax efficiency match increased expenditure. Despite a slight downward adjustment in the economic growth forecast for 2024 to 6% from 6.2%, the Philippines is still seen as a growth leader in the region, driven by domestic demand, with inflation expected to average 3.8% in 2024, supporting the case for a rate cut in the second half, while main risks include extreme weather events and geopolitical tensions disrupting shipping and causing supply shocks.
  • Looking Ahead, Money Supply is due out later today.
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The Philippines USD sovereign debt curve has bear-flattened today, yields are 10-15bps higher post US CPI. Earlier Philippines Trade Balance narrowed, while the unemployment rate dropped to 3.5% y/y from 4.5% y/y in Jan.

  • Post US CPI the 2Y yield is 15bps higher at 5.00%, 5Y yield is 17bps higher at 5.20%, 10Y yield is 17bp higher at 5.28%, while 5yr CDS is 2bp higher to 64bps
  • The Philip to US Treasury spread difference has tighten over the past week with the front-end & long-end are now at the tightest levels since June 2023, the belly of the curve lags with the 5-7yr area off YtD tights, the 2y is 4bps, the 5yr is 60bps, while the 10yr is 75bps.
  • Cross-asset moves: the USD/PHP is unchanged at 56.499, PSEi Index is 0.80% lower, Corporate Credit curve is 2-6bps higher over the week with better buying out past 5yr maturity, while US Tsys yields are flat to 3bps lower as the curve steepens.
  • ADB believes that the country's broader fiscal deficit outlook until 2028 remains acceptable if government spending prioritizes infrastructure and social services, and efforts to improve tax efficiency match increased expenditure. Despite a slight downward adjustment in the economic growth forecast for 2024 to 6% from 6.2%, the Philippines is still seen as a growth leader in the region, driven by domestic demand, with inflation expected to average 3.8% in 2024, supporting the case for a rate cut in the second half, while main risks include extreme weather events and geopolitical tensions disrupting shipping and causing supply shocks.
  • Looking Ahead, Money Supply is due out later today.