As of February 28, 2026
PHP
Local government bonds ended March with yields spiking across the curve. While the rise in yields was the highest in the belly wherein market rates rose by 100-116 bps, the front and long end followed the jump. The front end moved up 43-87 bps while the longer-dated bonds stepped up 47-87 bps.
Market sentiment strongly leaned towards being defensive as escalating tensions in the Middle East and a renewed surge in oil prices heightened inflation concerns. Oil prices repeatedly breached the USD 100 per barrel mark during the month while the peso weakened to fresh record lows going above 60. In addition, hawkish remarks from Bangko Sentral ng Pilipinas (BSP) Governor Remolona weighed further on sentiment.
Demand in the auctions also remained subdued. Auctions by the BTr also saw subdued demand with the 7, 10 and 24-year reissuances only being partially awarded given the elevated yields that investors were seeking. The BSP also held an off-cycle meeting wherein they chose to hold policy rates at current levels.
Outlook
The GS market may continue trading with a defensive tone as the Middle Eastern conflict rages on, pressuring oil prices higher. Local bond yields may continue their upward trend as players remain axed to reduce risk for the meantime. Given this, we remain cautious on further extending duration positions while being mindful of taking advantage of the current elevated levels.
USD
The US Treasury yields were pushed higher as rising oil prices and ongoing tensions in the Middle East kept inflation concerns elevated. Yields across the curve moved up 18-44 bps except for those that were maturing within 6 months wherein yields remained sticky, only moving up by 1-7 bps.
The escalation of these tensions over the month kept investors cautious despite the US being a net exporter of petroleum products. In terms of economic indicators, revised data showed economic growth slowed to an annualized 0.7% in the fourth quarter, down from the prior 1.4% and well below consensus expectations of also 1.4%. US inflation for February came in as expected at 2.4% YoY, being unchanged from the previous month. However, market focus remained firmly on geopolitical risks, with macro data taking a back seat.
Outlook
Geopolitical developments and movements in energy prices remain key drivers for global bond markets. With inflation concerns lingering and rate cuts no longer priced in, global yields may remain elevated, keeping investor positioning cautious in the near term.
Index Fund
Philippine equities performance deteriorated in March, alongside the whole Asia region, with the Philippine Stock Exchange Index (PSEi) declining 10% month-on-month to close at 5,948.94. The conflict in the middle east resulted in WTI crude rising by 64.85% in March and the 10-year Philippine government securities rate reaching as high as 7.14%.
Inflation expectations and estimates have adjusted upwards with most research houses now estimating a breach beyond the BSP target range of 2-4%. Economic growth expectations have also been adjusted downwards. Corporate guidance has also turned more cautious coming from an already subdued expectation even prior to the US-Iran war. Cyclical sectors lead the decline with property, consumer, and banking names being the worst performers. Utilities and staple retailers relatively outperformed.
The ATR FAMI Philippine Index Fund (First Metro Save & Learn Philippine Index Fund) was down 8.92% MoM in March.
The conflict in the middle east has extended to a period that the elevated oil price is now likely to cause a breach in the target inflation range of the BSP beyond the 4% level in the coming months. The march inflation print of 4.1% does not reflect yet the second-round effects that are yet to happen. The on-going conflict is expected to result in subdued growth for both economy and corporates, which will compound the already weak 1Q26 driven by the slow fiscal spending recovery. For April, we expect the risk appetite to continue to be cautious although signs of de-escalation may provide some relief rallies. Still, the upside will be capped by the expectation that oil price may continue to be elevated for a while even after a de-escalation. The higher government securities (GS) rate currently is also reducing the relative attractiveness of equities in the short-term.
Equity Fund
Philippine equities performance deteriorated in March, alongside the whole Asia region, with the Philippine Stock Exchange Index (PSEi) declining 10% month-on-month to close at 5,948.94. The conflict in the middle east resulted in WTI crude rising by 64.85% in March and the 10-year Philippine government securities rate reaching as high as 7.14%.
Inflation expectations and estimates have adjusted upwards with most research houses now estimating a breach beyond the BSP target range of 2-4%. Economic growth expectations have also been adjusted downwards. Corporate guidance has also turned more cautious coming from an already subdued expectation even prior to the US-Iran war. Cyclical sectors lead the decline with property, consumer, and banking names being the worst performers. Utilities and staple retailers relatively outperformed.
The First Metro Save and Learn Equity Fund was down 9.3% MoM in March, tracking the overall performance of the benchmark for the month. Key overweight in the consumer and utilities sectors were the main sources of outperformance while our underweight in industrials dragged performance.
The conflict in the middle east has extended to a period that the elevated oil price is now likely to cause a breach in the target inflation range of the BSP beyond the 4% level in the coming months. The march inflation print of 4.1% does not reflect yet the second-round effects that are yet to happen. The on-going conflict is expected to result in subdued growth for both economy and corporates, which will compound the already weak 1Q26 driven by the slow fiscal spending recovery. For April, we expect the risk appetite to continue to be cautious although signs of de-escalation may provide some relief rallies. Still, the upside will be capped by the expectation that oil price may continue to be elevated for a while even after a de-escalation. The higher government securities (GS) rate currently is also reducing the relative attractiveness of equities in the short-term. We continue to take a balanced approach of positioning in high dividend yielders and quality deep value cyclicals.
Consumer Fund
Philippine equities performance deteriorated in March, alongside the whole Asia region, with the Philippine Stock Exchange Index (PSEi) declining 10% month-on-month to close at 5,948.94. The conflict in the middle east resulted in WTI crude rising by 64.85% in March and the 10-year Philippine government securities rate reaching as high as 7.14%.
Inflation expectations and estimates have adjusted upwards with most research houses now estimating a breach beyond the BSP target range of 2-4%. Economic growth expectations have also been adjusted downwards. Corporate guidance has also turned more cautious coming from an already subdued expectation even prior to the US-Iran war. Cyclical sectors lead the decline with property, consumer, and banking names being the worst performers. Utilities and staple retailers relatively outperformed.
The ATR FAMI Philippine Equity Exchange Traded Fund (First Metro Philippine Equity Exchange Traded Fund) was down 8.86% MoM in March.
The conflict in the middle east has extended to a period that the elevated oil price is now likely to cause a breach in the target inflation range of the BSP beyond the 4% level in the coming months. The march inflation print of 4.1% does not reflect yet the second-round effects that are yet to happen. The on-going conflict is expected to result in subdued growth for both economy and corporates, which will compound the already weak 1Q26 driven by the slow fiscal spending recovery. For April, we expect the risk appetite to continue to be cautious although signs of de-escalation may provide some relief rallies. Still, the upside will be capped by the expectation that oil price may continue to be elevated for a while even after a de-escalation. The higher government securities (GS) rate currently is also reducing the relative attractiveness of equities in the short-term.
Exchange Traded Fund
Philippine equities performance deteriorated in March, alongside the whole Asia region, with the Philippine Stock Exchange Index (PSEi) declining 10% month-on-month to close at 5,948.94. The conflict in the middle east resulted in WTI crude rising by 64.85% in March and the 10-year Philippine government securities rate reaching as high as 7.14%.
Inflation expectations and estimates have adjusted upwards with most research houses now estimating a breach beyond the BSP target range of 2-4%. Economic growth expectations have also been adjusted downwards. Corporate guidance has also turned more cautious coming from an already subdued expectation even prior to the US-Iran war. Cyclical sectors lead the decline with property, consumer, and banking names being the worst performers. Utilities and staple retailers relatively outperformed.
The ATR FAMI Philippine Equity Exchange Traded Fund (First Metro Philippine Equity Exchange Traded Fund) was down 8.86% MoM in March.
The conflict in the middle east has extended to a period that the elevated oil price is now likely to cause a breach in the target inflation range of the BSP beyond the 4% level in the coming months. The march inflation print of 4.1% does not reflect yet the second-round effects that are yet to happen. The on-going conflict is expected to result in subdued growth for both economy and corporates, which will compound the already weak 1Q26 driven by the slow fiscal spending recovery. For April, we expect the risk appetite to continue to be cautious although signs of de-escalation may provide some relief rallies. Still, the upside will be capped by the expectation that oil price may continue to be elevated for a while even after a de-escalation.
