EQUITIES
Philippine equities extended their decline in April, with the PSEi closing at 5,833.64, down 1.9% month-on-month and 8.2% lower year-on-year. Market sentiment remained fragile throughout the month as geopolitical tensions stemming from the prolonged Iran conflict continued to weigh heavily on global risk assets. Concerns over disruptions to oil supply, particularly due to the intensified US blockade of the Strait of Hormuz, kept crude prices elevated and reinforced risk-off sentiment across emerging markets, including the Philippines. The market experienced brief periods of optimism during the month. A temporary ceasefire agreement announced on April 9 lifted the PSEi above the 6,000 level, with the index rallying 2.22% to 6,089.91 while the peso strengthened to PHP59.43/USD. However, the relief proved short-lived as uncertainty over the durability of the ceasefire and renewed geopolitical escalation quickly reversed gains. Despite President Trump’s announcement of an extended ceasefire later in the month, the market continued to weaken, with the PSEi recording five consecutive daily losses and slipping below 5,900 as the peso depreciated sharply to a record intra-day low of PHP61.73/USD.
Domestic macroeconomic conditions further pressured sentiment. As a net energy importer, the Philippines remained particularly vulnerable to higher oil prices, which intensified inflationary concerns and tightened financial conditions. March inflation accelerated to 4.1%, exceeding the BSP’s target range and prompting a shift toward a more hawkish monetary stance. In response, the BSP raised policy rates by 25 basis points in April — its first hike since October 2023 — while significantly increasing its 2026 inflation forecast to 6.3%. Toward month-end, sentiment stabilized modestly as bargain hunting emerged and the UAE’s surprise decision to exit OPEC raised expectations of improved global oil supply and lower fuel prices. The PSEi snapped its losing streak on April 29, gaining 0.7% to close at 5,907.89, although overall market conditions remained cautious amid continued geopolitical and macroeconomic uncertainty.
The conflict in the middle east continues to weigh on Philippine equities. While the conflict only stared in March, the 1Q26 corporate earnings so far already started showing subdued earnings print particularly in the banking and property space. The forward guidance from the corporates also continues to cautious, resulting in downgrades across cyclical sectors. The 1Q26 GDP print also reflected this and is further compounded by the surge in inflation print for April that was beyond both consensus and BSP estimates. Anticipation of further rate hikes is expected to further weigh on the sentiment for Philippine equities. We continue to take a defensive approach by positioning in high dividend yielders and companies with stable earnings outlook amidst this uncertainty.
FIXED INCOME – PHP
Market Overview
April was a volatile month for Philippine fixed income, as an oil shock-driven inflation surge forced a sharp repricing across the local government securities curve. Headline inflation jumped to 7.2% year-on-year — the highest since March 2023 — far exceeding the 5.5% consensus estimate, driven primarily by fuel and food price pressures linked to the ongoing Middle East conflict. In response, the BSP raised its benchmark rate by 25 basis points to 4.50% — its first tightening move in over two years. The 10-year government bond yield climbed to 7.15%, its highest level since November 2022, while T-bond auctions were only partially awarded as investors demanded higher yields.
Outlook
The near-term outlook remains challenging. The BSP has signaled readiness to tighten further should inflation remain elevated, with the trajectory of global oil prices the key variable to watch. Heavy government domestic borrowing will continue to exert supply pressure on the curve. We maintain a cautious stance on duration, favoring shorter-dated maturities. However, should oil prices normalize and inflation show signs of peaking, longer-tenor bonds could present attractive entry points at current yield levels.
FIXED INCOME - USD
Market Overview
US Treasury yields moved higher as elevated oil prices and persistent Middle East tensions continued to fuel inflation concerns. Yields rose by 4–8 bps across the curve, except at the front end, which edged lower by 1–5 bps.
While the Federal Reserve kept rates unchanged—potentially marking Jerome Powell’s final policy meeting as Chair—the overall tone remained cautious amid lingering upside risks to inflation. On the data front, both 1Q GDP and March inflation surprised to the downside at 3.6% and 3.3%, respectively. However, market attention remained firmly anchored on geopolitical developments, with macroeconomic data taking a secondary role.
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.
