Philip Sov Debt Yields Lower, FinSec Sees Rate Cut, Lower GDP

The Philippines USD sovereign debt curve has bull steepened on Friday, yields are 1-3bps lower. There has been little in the way of market headlines, other than Philippines Finance Secretary proposing revising down GDP growth target for 2024 and expects a cut to rates later this year. Looking back over the week yields are 2-8bps lower as curves bull flattened, also the 3-5yr part of the curve underperformed the move.

• The PHILIP curve is steeper today with yields 1 to 3bps lower, the 2Y yield is 3bps lower at 4.78%, 5Y yield is 2bp lower at 4.93%, the 10Y yield is 1bp lower at 5.00%, while 5yr CDS is 1.5 higher at 61bps.
• The PHILIP to UST spread difference has significantly tighten over the past week especially in the 2-5yr part of the curve, 2y is 15bps (-6bps), the 5yr is 69bps (-4bp), while the 10yr is 74bps (-2bps)
• Cross-asset moves: the USD/PHP is 0.28% higher, PSEi Index is down 0.90%, Corporate Credit curve is 1-4bps lower over the past week, while US Tsys yields are 1-2bps lower.
• Philippines Finance Secretary Ralph Recto suggests a smaller-than-expected reduction in the central bank's key rate due to persistent inflation concerns, anticipating only two adjustments this year instead of the previously projected four. Recto proposes revising down the GDP growth target for 2024 to a more realistic 6%, contrasting President Ferdinand Marcos Jr.'s view of maintaining high interest rates to tackle inflation. Despite economic challenges, Recto emphasizes the need for realistic GDP targets, highlighting the Philippines' robust growth momentum despite falling short of last year's goal.
• Looking Ahead: Calendar is light for the remainder of the month