Philip Sov Curves Steeper, FinMin Sees Rates On Hold

The Philippines USD sovereign debt curve is slightly steeper today, with yields 1-3bps higher. Little in the way of market headlines today. Finance Secretary Ralph Recto shares insights on the direction of Philippine monetary policy, expecting the Bangko Sentral ng Pilipinas (BSP) to maintain steady interest rates in the upcoming policy meeting, with a possible rate cut later in the year.

• The PHILIP curve is steeper today with yields 1-3bps higher, the 2Y yield is 0.5bps higher at 4.781%, 5Y yield is 0.8bp higher at 4.92%, the 10Y yield is 1.4bps higher at 4.985%, while 5yr CDS is 0.5bp higher at 62.5bps.
• The PHILIP to UST spread difference is a touch wider in the front out with the 2y moving 5bps wider to start the week, while the longer end is mostly unchanged this week recovering from moves wider on Monday, the 2y is 20bps (+3bps), the 5yr is 70bps (-1bp), while the 10yr is 75bps (-1.5bps)
• Cross-asset moves: the USD/PHP is down 0.14% at 56.316, PSEi Index is down 0.67%, Corporate Credit curve is 2-7bps lower over the past week, while US Tsys yields are flat to 1.5bps lower
• Philippines Foreign Affairs Secretary Enrique Manalo announced the signing of diplomatic notes for a 250 billion yen ($1.7 billion) official development assistance loan from Japan. The loan will fund the Dalton Pass East Alignment Road Project to improve connectivity in the main Luzon island and the third tranche of the Metro Manila Subway Project-Phase I.
• Finance Secretary Ralph Recto anticipates that the Bangko Sentral ng Pilipinas (BSP) will maintain interest rates unchanged for the fourth consecutive policy meeting since October 2023. He expects no changes in interest rates during the upcoming April 8 meeting, although he suggests a potential rate cut of possibly 50 basis points later in the year. This expectation aligns with BMI's forecast of a 75-basis-point interest rate cut by the second half of 2024, in line with anticipated adjustments by the US Federal Reserve. The BSP's decision also considers factors such as the inflation rate, which increased to 3.4 percent in February, but eased slightly in the BSP's latest risk-adjusted forecast for 2024 and 2025, remaining within the government's target range of 2 percent to 4 percent.
• Looking Ahead: Calendar is light for the remainder of the month