Shorter-maturity Philippine bonds look increasingly favorable relative to longer-dated ones, aided by the central bank’s pivot to an easing stance, which will also boost lending in the economy. ManilaBulletin READ:
Emerging Asia’s formerly most hawkish central bank sent the two-to-10-year curve into inversion in May for the first time since June 2019. Yields have stayed around those levels since. But Bangko Sentral ng Pilipinas’s decision to cut the reserve requirement ratio — by 250 basis points versus an expected 200 basis points — should ease pressure on shorter yields, which will help the sovereign curve steepen.
The spread between two- and 10-year bonds dipped below zero in May, following a cumulative 425 basis points of rate hikes from the BSP since 2022. That was the largest tightening cycle among emerging Asia economies as the central bank sought to tame surging price pressures. But inflation is now slowing, with the consumer-price index dropping to 6.1% in May from a 15-year high of 8.7% in January.
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