PHILIP Sov Debt Curve Flattens, President Says Too Early to Cut

The Philippines USD sovereign debt curve is slightly flatter on Wednesday, EM sovs have collectively under-performed moves made by the front-end US Treasury curves. Earlier BSP Chief says they have room to further cut the RRR, while Philippines President says it's too earlier to start cutting rates due to high inflation and finally late on Tuesday Philippines Balance Of Payments deficit narrowed to -$196m from -$740m the month prior.

• Curves are slightly flatter with yields 1-3bps lower. The 2Y yield is unchanged at 4.86%, 5Y yield is 1bp lower at 5.01%, the 10Y yield is 2bp lower at 5.08%, while 5yr CDS is 1.5bp lower at 58.5bps.
• The PHILIP to UST spread difference has significantly tighten over the past week, however Tuesday did see the PHILIP widen in the front end with yields underperforming 2-3bps, 2y is 17.5bps (+3.5bps), the 5yr is 71bps (+2bp), while the 10yr is 79.5bps (unchanged)
• Cross-asset moves: the USD/PHP is 0.28% higher, PSEi Index is up 0.18%, Corporate Credit curve is 4-6bps higher over the past week, while US Tsys yields are unchanged with Japan out.
• Bangko Sentral ng Pilipinas Governor Eli Remolona suggests the potential for further reduction in banks' reserve requirement ratio, emphasizing the need for thorough research on its impact. The central bank is closely monitoring rice prices due to their significant influence on inflation, although monetary policy decisions won't be solely based on them, Remolona highlights the importance of research-driven policymaking.
• Looking Ahead: Calendar is light for the remainder of the week.