Economic Updates

The Philippine central bank raised interest rates by 25 basis points this week. This move widened the spread between local and US yields: the Philippine 10-year bond now yields around 7.3%, compared with 4.78% on the US 10-year Treasury, a gap of roughly 2.5 percentage points. The wider spread is intended to ease pressure on the peso, which has been trading near record lows of about 62.5 per US dollar.

On inflation, the latest reading came in at 6.1%, an improvement from the prior month though still above the 6% threshold. Oil prices, currently near $92 per barrel, remain a key swing factor; a pullback toward the $80 range would likely support a faster pace of disinflation.

Fixed Income Outlook

Given current yield levels, fixed income continues to stand out as the more attractive opportunity for investors seeking income and looking to lock in favorable rates.

Equity Market Update

The local stock market has stayed volatile, trading between a low of roughly 5,900 and a high near 6,400 in recent weeks, and sitting around 6,100 at the time of this briefing.

Within the market, ICTSI continues to be a standout performer, posting a year-to-date return of approximately 64% despite broader volatility. Mining names, including Apex, Atlas, and Felix, have also performed well, benefiting from elevated gold prices.

Year-End Outlook

Looking ahead, the market is expected to remain in a consolidation phase, though the year-end target stands at 6,500, implying roughly 400 points of upside from current levels. Rather than additional rate cuts, the more likely and still-favorable scenario is that the central bank holds steady and avoids further hikes.

A combination of easing inflation, stable rates, and seasonal remittance inflows from overseas Filipino workers in the fourth quarter could provide additional support for the peso into year-end.

Main Takeaway

For now, interest rates and bond yields remain the more compelling opportunity, rather than equities, which are likely to stay in consolidation mode with a 6,500 year-end target. Inflation, oil prices, and the peso's trajectory remain the key variables to watch heading into the final quarter.