Local Government Securities Market
Yields are up slightly after the release of hawkish FOMC statement and the filing of the Senate Ways and Means Committee’s version of the tax reform bill. The market was initially defensive with bid-offer levels at around 3 - 5 bps higher from the previous day as the Fed signaled a generally positive economic outlook despite mixed data, soft inflation, and possibly more distorted data in the coming months due to the damage of the hurricanes. Odds of a rate hike this December went up to around 60%, from 53% pre-FOMC statement. The two medium-term bonds FXTN 10-60 and FXTN 10-61 were again the bonds of choice for trading with both initially traded higher by 4 – 5 bps likely on a knee-jerk reaction. As the day progressed, however, buying interest was eventually seen with tax reform developments likely also providing a bit of a push. Closing levels for above-mentioned bonds are at 4.415% and 4.645%, respectively, up by only 1 – 2 bps. Total volume of deals reached Php 11.4 Bn.
With the two policy meetings now out of the way, players will likely now look for the next set of market-movers. Additional hints on the likelihood of a Fed rate hike this December would be monitored.