September 3, 2010

4 to 7-year liquid issues continued to comprise bulk of the market's activity and volume, with yields still on the way down despite no news or data released today. Yields on done trades dropped by as much as 8 basis points in these tenors, while offer 5 to 11.5 basis points lower in 10-year securities were lifted. Volume of trades still reached a good Php 21.77bn in the last morning session this week.

Market players added another Php 19.93bn worth of trades in the afternoon, despite trading within a tight range at the morning's low levels.

Week-on-week, yields declined by 3 to 12.5 basis points across medium-termed securities (3 to 7 years), while dropping a steeper 35 to 47.5 basis points in longer-dated securities, specifically the 7-year benchmark RTB 7-02, FXTN 10-50, and the 10-year benchmark RTB 10-01. Bullish behavior is still due to the stronger-than-expected growth in the 2nd quarter reported last week, supported by the successful 7-year bond auction to start the week, and the lower deficit projection for next year. Also, market players are likely pricing in a still benign August inflation figure to be released next week.

Market activity is still seen to get stronger next week, as the inflation data for August is up for release on Tuesday. Traders may wait for the data before moving aggressively once again. Market survey expects a 3.9% CPI, flat from July's annual pace.