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Small banks continue lending to firms as reserve compliance

SMALL BANKS continued to lend to micro, small, and medium enterprises (MSMEs) and eligible large enterprises (LEs) as part of their alternative compliance with reserve requirements, the Bangko Sentral ng Pilipinas (BSP) said in a report.

“For the reserve week ending 27 July 2023, TBs (thrift banks) and RCBs (rural and cooperative banks) allocated an aggregate of P13.3 billion and P6.5 million loans to MSMEs and LEs, respectively, for compliance with the reserve requirements. These accounted for 1% and 0.0005% of total required reserves for the said reserve week,” the central bank said in a report on recent trends in the Philippine financial system.

During the coronavirus pandemic, the central bank allowed banks to count their loans to MSMEs and pandemic-hit LEs as part of their compliance with reserve requirements.

The relief measure expired on June 30. However, small lenders can still count their loans to MSMEs and LEs as alternative compliance with reserve requirements until they are fully paid, but not later than Dec. 31, 2025.

“The unwinding was set to coincide with the reduction in the reserve requirement ratios by 30 June 2023 to facilitate the transition, supporting the banks’ continued compliance with the reserve requirement and managing friction costs related to the policy adjustment,” the BSP said. 

In June, the BSP cut the reserve requirement ratios of big banks by 250 basis points (bps) to 9.5%, by 200 bps to 6% for digital banks, and by 100 bps for thrift banks, and rural and cooperative banks to 2% and 1%, respectively.

In 2022, banks lent P493.5 billion to MSMEs as alternative compliance with reserve requirements. This was 6.6% higher than the P463.1 billion a year prior.

By banking group, universal and commercial banks extended P390.9 billion in loans to MSMEs, while rural and cooperative banks lent P52.7 billion. — KBT

Farm industry says subsidy for rice retailers costing government P2 billion

PHILIPPINE STAR/ MICHAEL VARCAS

FARMERS said the P15,000 subsidy for rice dealers being squeezed by the price controls on the grain is expected to cost the government P2 billion.

“Mapapagastos pa ang gobyerno ng P2 billion para ayudahan ang mga retailer (The government now has to spend P2 billion to aid the retailers),” Raul Q. Montemayor, national manager for the Federation of Free Farmers, said in a Viber message.

Farmers have expressed fears that traders will low-ball them on purchases of palay, or unmilled rice, to compensate for the margin squeeze resulting from the price controls.

Executive Order No. 39 imposed a temporary price ceiling of P41 per kilogram for regular-milled rice and P45 per kilogram for well-milled rice.

The Department of Agriculture (DA) has received complaints from farmers that traders might collude to pay a “uniform lower price” to make up for the price controls.

The effect has been to lower the price farmers receive for their harvest, leading to calls for a farmer subsidy as well to compensate them for lost revenue.

Samahang Industriya ng Agrikultura Executive Director Jayson H. Cainglet described the retailer subsidy as assistance in acquiring more expensive inventory.

“’Yung ayuda ay para maitawid lang ’yung pagbili nila ng mas mahal na bigas mula sa mga wholesalers or millers (The subsidy is just to cover their purchase of more expensive rice from wholesalers or millers),” he added.

He estimated that the subsidy was sufficient to procure 7,000 kilograms (kg) of rice, equivalent to 280 sacks of rice at 25 kilos of rice.

He said the inventory of a typical retailer turns over every seven to 10 days.

He said that average rice stocks from retailers usually last for seven to 10 days.

The Department of Social Welfare and Development (DSWD) started handing out the P15,000 cash aid to rice retailers in Quezon City, San Juan, and Caloocan.

About 232 rice retailers received the subsidy, with 48 were from Quezon City, 136 from Caloocan City, and 48 from San Juan.

The Presidential Communications Office said in a statement on Sunday, that the Departments of Agriculture and Trade and Industry (DTI) have identified another 337 beneficiaries who are set to receive cash aid on Sept. 11.

Among these are 15 rice retailers in Pateros, 161 in Navotas, 129 in Parañaque, and 32 in Zamboanga del Sur.

“As the government’s cash assistance continues, the DSWD and the DTI will meet on Monday to discuss the list of beneficiaries for the rest of the National Capital Region (NCR) and those in the provinces, among other measures,” it said. — Adrian H. Halili

National Government outstanding debt

THE National Government’s (NG) outstanding debt hit a record P14.24 trillion as of end-July due to higher domestic borrowings, the Bureau of the Treasury (BTr) said on Friday. Read the full story.

National Government outstanding debt

Bigger gains seen for carriers as volumes rise

PHILSTAR

LOCAL airline companies are expected to post higher second-semester earnings, an analyst said, pointing to the expected recovery of domestic and international passenger and cargo volumes.

“The main catalyst would be the further recovery of domestic and international passenger and cargo volume as the economy reopened towards greater normalcy,” said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message.

He said the airlines are on the right recovery path towards  “pre-pandemic levels or eventually higher.”

For the April-to-June period, PAL Holdings, Inc., the listed operator of flag carrier Philippine Airlines, posted an attributable net income of P6.23 billion, more than double the P2.47 billion in the same period last year, driven by higher revenues.

The company’s gross revenues for the second quarter expanded by 34.1% to P45.24 billion from P33.74 billion in the same period last year.

Cebu Air, Inc., the listed operator of budget carrier Cebu Pacific, reported a profit of P2.67 billion in the second quarter, turning around from the P1.89-billion net loss incurred in the same period last year, after a significant boost in passenger revenues.

From April to June, the company reported P22.67 billion in gross revenues, marking a 62.3% increase from last year’s P13.97 billion.

Passenger revenues, totaling P15.84 billion, constituted the majority of Cebu Air’s second-quarter top line, reflecting an 86.3% increase compared with last year’s P8.51 billion.

Meanwhile, the company recorded a 49.7% decline in cargo revenues, which amounted to P866.9 million, down from P1.72 billion in the same period last year.

Throughout the quarter, the company transported 5.46 million passengers, 29% higher compared with the previous year.

“Offsetting risk factors would include higher fuel prices with global crude oil prices near 10-month highs recently after oil production cuts by Saudi Arabia and Russia, among the world’s largest oil producers, since fuel accounts for a large share of the cost of airlines,” Mr. Ricafort said.

In a report last month, the Civil Aeronautics Board (CAB) said that it had raised the passenger and cargo fuel surcharge rate for this month, after keeping it at level 4 for three consecutive months or from June to August.

CAB announced that the applicable fuel surcharge for domestic and international flights was raised by two levels or to Level 6.

“Higher inflation that is added to operating cost and eats into profit margins, also added to cost of imported capital and inputs such as aircraft, parts, maintenance, fuel, among others,” he said.

In August, headline inflation rate quickened to 5.3% from 4.7% in July, but slower than the 6.3% clip a year ago. Last month’s rate is still within the Bangko Sentral ng Pilipinas’ 4.8-5.6% forecast range for the month. — Ashley Erika O. Jose

Revenge consumerism

FREESTOCKS-UNSPLASH

Corporate news: San Miguel Corp. (SMC) President Ramon Ang announced that SMC subsidiary Velocità Motors has been chosen by Italian sports car maker Ferrari to be its exclusive distributor in the Philippines (ABS-CBN News, Sept. 3, 2023).

Serving as a prequel to the Ferrari distributorship of Velocità was the setting up of the SMC Asia Car Distributors Corp. in July 2017 (65% owned by San Miguel Corp. and the rest owned by then Palawan Governor Jose “Pepito” Alvarez) for the importation and distribution of BMW vehicles in the Philippines (Rappler, July 18, 2017). This marked SMC’s entry into the motoring business.

Esquire magazine asked Mr. Ang in its April 19, 2021, issue, how luxury car sales were doing at the height of the pandemic. “According to Ang, despite the effects of the pandemic, sales of luxury and exotic cars globally have been brisk. With the super-rich having no place to go because of travel restrictions, buying luxury and exotic cars have become a form of ‘revenge’ shopping and retail therapy.”

Fast forward to the Ferrari launch, and Mr. Ang said the same thing about luxury car sales: “Not even a cooling economy will stop the very wealthy from buying luxury sports cars. Parang revenge travel, ’di ba? Now [its] revenge buying luxury car, ano?”

Two vehicles were presented at the media launch, one of which was the Purosangue 715 hp, Ferrari’s first-ever four-door four-seater to be powered by a V12 engine, with a 0-100 time of 3.3 seconds and a top speed of 309 kph. The selling price starts at P46 million, according to topgear.com.ph (posted Sept. 3, 2023). Aside from the Purosangue, Ferrari also showcased “the 296 GTS, the spider version of the hybrid V6-engined 296 GTB which website motowheeler.com says will cost P23 million.”

“You have to wait two to three years to buy (estimated delivery from ordering), maybe then you will have enough savings,” Mr. Ang teased. “I am confident [in] the luxury vehicle business in the Philippines amid inflation and other global issues affecting [the] supply chain,” Mr. Ang said on ANC.

At the same time that teasers were out for the expensive Ferraris, the Organization for Economic Co-operation and Development (OECD) came out with the discomforting news that it was trimming its gross domestic product (GDP) growth forecast for the Philippines for this year. “In its latest Economic Outlook for Southeast Asia, China, and India update, the OECD said it now expects Philippine GDP to expand by 5.6% this year, slightly lower than the 5.7% projection in March. This is below the government’s 6-7% GDP growth target for this year. The OECD kept its 2024 growth projection at 6.1%, which is still below the government’s 6.5-8% target” (BusinessWorld, Sept. 4, 2023).

The OECD said elevated inflation and higher borrowing costs dragged private consumption and investments in the second quarter. The slowdown was also amplified by the contraction in government spending, it added. The annual inflation rate in the Philippines unexpectedly rose to 5.3% in August, from July’s 16-month low of 4.7%. The latest result was also above market forecasts of 4.7%, with food prices rising the most in five months, 8.1% vs 6.3% in July, according to Trading Economics. The high inflation dampened demand, which lowered consumption and slowed GDP growth.

Finance Secretary Benjamin Diokno was very happy with the 7.6% GDP growth seen in December 2022, declaring that “For the Philippines, the worst is over and the best is yet to come.” But the uptick in GDP growth in 2022 “mainly reflected pent-up domestic demand,” according to the International Monetary Fund (IMF) team that held meetings in Manila on May 8-12 this year to discuss recent economic and financial developments and the outlook for the Philippine economy. But 2022 was an election year, and candidates for the executive and legislative branches of government at every level — national, provincial, and local (except for the barangay officials) plunked billions of pesos into the economy in the first half of the year. In Rappler’s “Tracker” of July 14, 2022, more than P1.77 billion was spent by the presidential, vice-presidential, and senatorial candidates alone (not including multiple candidates for 316 seats in the House of Representatives and some 15,273 local government positions).

Inflation is cumulative, and sticky, like the sticky prices that feed it. Inflation is the frightening realization that now there is money, but not enough goods or services available to buy. When the Bangko Sentral ng Pilipinas (BSP) raised the borrowing rates, it was supposed to discourage borrowing and thus lessen spending and hopefully encourage saving excess money through the deferment of spending. But this was not enough to discourage borrowing and spending and to foster savings and investment. “It appears that high inflation and policy rate hikes had a larger-than-expected impact on growth,” Citicorp said in an interview-poll taken of 21 economists by BusinessWorld (Aug. 13, 2023) on the prospects for GDP growth at end 2023.

“To achieve the government’s 6-7% growth target for 2023, the Philippine economy has to grow by at least 6.6% in the second half. An aggressive catch-up plan for infrastructure projects (roads, bridges, airports, seaports, power, water, irrigation, telecommunications facilities, digitalization, school buildings, housing and others), quicker response by GOCCs (government-owned and -controlled corporations), and strong and deliberate spending by resource-surplus local governments are essential parts of the solution to the relatively weak second-quarter growth performance of the Philippine economy,” Mr. Diokno said as he reacted to the BusinessWorld poll. The weaker-than-expected growth in the second quarter was partly attributed to a 7.1% contraction in government spending, which was a reversal of the 10.9% growth a year ago.

The Philippines remains, largely, a consumption driven economy, with most of its GDP being derived from services, trade, overseas remittances and business process outsourcing. Because of this, the retail sector could eventually account for as much as a fifth of GDP (oxfordbusinessgroup.com/2016). Private Consumption was 73.5% of Nominal GDP in June 2023, compared with 78.9% in the previous quarter, according to CEIC economists. In other words, the burden of growth depends largely on the consumption of the growing population with its increasing needs and wants. It desperately feels like a cat turning circles to catch its own tail.

But consumerism is good for business, as it stimulates production and delivery, and gives immediate recognition of income and reinvestment. Economist Adam Hayes of Investopedia calls it a predominantly Keynesian idea that consumer spending is the key driver of the economy and that encouraging consumers to spend is a major policy goal. He acknowledges the apprehension of sociologists that this can lead to a materialistic society that neglects other values. Traditional modes of production and ways of life can be replaced by a focus on consuming ever more costly goods in larger quantities.

And the political economist Thorstein Veblen spoke of “Conspicuous Consumption” in 1899, theorizing that some consumers purchase, own, and use products not for their direct-use value but as a way of signaling social and economic status. This is observably true across levels of society, in the taunting “keeping up with the Joneses” accusation leveled at those who live beyond their means.

Ramon Ang resonated with Veblen on conspicuous consumption, albeit from the business view: “Really wealthy people will always have money, and luxury cars are a form of conspicuous spending. Since travel and other luxuries are not an option these days, buying a supercar seems to be a popular choice these days,” he said in the Esquire interview.

Now even the 51% self-rated poor, and the 31% borderline poor in the Philippines are awakened to the P46-million Ferrari as a gauge of economic and social status.

I can dream, can’t I?

 

Amelia H. C. Ylagan is a doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

‘LUBES’ flow within Shell Auto Workshops

From left are GCash Enterprise Sales Head Martin Kristopher Limgenco II, Shell Lubricants Philippines Digital Manager Ika Halili, Shell Lubricants Philippines National Sales Manager for Indirect Channel Paz Famador-Tiongco, Shell Lubricants Philippines Vice-President Jackie Famorca, Shell Lubricants Philippines Marketing and Business Development Manager Leo Mendoza, Francorp Philippines AVP-Consultancy Dana Cuneta, Shell Helix Brand Manager Chi Malabanan, and Shell Lubricants Philippines Business Development Manager Jensen Garcia. — PHOTO FROM SHELL LUBRICANTS

By Dylan Afuang

SHELL HELIX Auto Workshops — a hundreds-strong network of service centers around the country that are a franchise of Shell Lubricants — appear to balance the interests of both business and consumer. These are owners of out-of-warranty vehicles and the service centers themselves, respectively.

Shell Lubricants, part of Shell companies in the Philippines, provides its franchised outlets with Shell Helix’s line of engine oil and lubricants, along with various business tools. In turn, these outlets carry and deliver a wide range of services and products that promise to keep their customers’ cars in prime condition.

Underscoring the importance of the company’s partnership with the workshops, Shell Lubricants Vice-President Jackie Famorca, at a recent company event, stated, “Shell Helix is a credible partner that can help maximize your business potential by connecting you to people and providing you with an established network of experts who can help you succeed.”

Staged by Shell Philippines, that event was the “Shell Helix Fast Track: Auto Workshop Business Summit” held last week, which gathered the representatives of its affiliate workshops and members of the media for the purpose of sharing “current trends, tools, and topics” within the partnership among the auto outlets and vehicle lubricant manufacturer.

Franchise Shell Helix vehicle service centers include Auto Casa, Car Crew, and Car Doctor that carry the Shell Helix Auto Workshops branding, and they can be located using the brand’s workshop online locator (shell.com.ph/motorists/helix-workshop-locator.html).

And what manner of business-boosting services and strategies have and will benefit Helix franchises, existing and prospective? As detailed by Shell Lubricants Business Development Manager Jensen Garcia at the summit, these fall under the “LUBES” categories.

Firstly, franchise workshops can “Learn.” That means “For Shell Helix (franchises), we have certain programs that put (importance) on (workshops’) learning,” Mr. Garcia explained.

Through the brand’s Master Mechanic Program and Workshop Academy, mechanics of affiliate service centers aim to deliver better service by keeping abreast with the latest automotive technologies, gaining a mechanic certification, and earning rewards as they complete courses in the program.

Franchise workshops can “Upgrade,” because “In every customer journey, it begins with awareness,” as the executive explained.

To establish the shops’ branding and make them easier for customers to identify, Shell Helix can provide to them exterior and interior signage, display racks for products, advertising graphics, and facade design — some and all bearing Shell’s logo and signature red-and-yellow color combination.

Affiliate workshops can achieve “Business development” through the company’s providing of various equipment, consultancy services, and advantage promos exclusive to the merchants.

Included in the catalog of equipment are vehicle servicing paraphernalia that range from compact items such as car creepers and engine scanners, to larger units such as wheel balancer and two-post and scissor-type car lifters.

Workshops have the opportunity to “Elevate” their products and services online. “We want you to future-proof your businesses… on-ground but most especially online,” Mr. Garcia pitched.

Franchise workshops being included in the Shell Helix Workshop Locator is chief among these online marketing initiatives, and this is supplemented by virtual exposition for workshop owners, vouchers for Shell products on marketplaces, and social media advertisements.

Last in “LUBES” is “Shell Lubricants,” also known as the “most preferred lubricant of vehicle owners globally,” as boasted by the Shell Helix executive.

Serving a variety of engines is Shell Helix’s line of engine oils that come in fully and semi-synthetic and premium mineral formulas. Complementing this range are Shell’s brake and clutch fluid, coolant, and oil filter.

And likely coming to Shell Helix Workshops soon are the Shell Helix SUV, touted as the first oil suited for the motors of such vehicles, and Shell Helix with Pure Plus technology, an oil that the manufacturer claims is made from 99.5% natural gas.

Los Angeles City Council acts to spare Marilyn Monroe house from demolition

ZILLOW.COM

LOS ANGELES — The Los Angeles City Council voted on Friday to launch a process to designate actress Marilyn Monroe’s former home, where she died of a drug overdose in 1962, a historic and cultural monument, blocking plans to demolish the property.

The motion to initiate consideration of the Spanish Colonial-style house in LA’s Brentwood section for historic preservation was introduced by Councilwoman Traci Park and approved unanimously the same day, according to her spokesperson Jamie Paige.

In response to the 12-0 vote, the city’s Board of Building and Safety Commissioners immediately revoked a demolition permit that had been issued a day earlier. The City Council motion itself also bars major alterations to the property while review of its potential status as a landmark is under way.

Ms. Paige said she visited the house on Thursday and that no work had been done at the site, currently owned by a little-known entity called Glory of the Snow Trust.

Marilyn Monroe purchased the single-story, 2,900-square-foot (270-sq-meter) house in the early 1960s for $75,000 after the end of her third marriage, to playwright Arthur Miller, according to the Los Angeles Times. It was the only residence the actress, who spent part of her childhood in an orphanage and foster care, ever independently owned.

The screen legend, star of such films as Gentlemen Prefer Blondes, Some Like It Hot, and The Misfits, was found dead in a bedroom of the home in August 1962 at the age of 36. The cause of death was ruled to be acute barbiturate poisoning.

The Times reported that the half-acre (0.20-hectare) property, which included a swimming pool and guest house, was purchased in 2017 for $7.25 million by Glory of the Snow LLC, then managed by a hedge fund executive. It was sold to the Glory of the Snow Trust for $8.35 million earlier this year.

No representatives for the trust have been identified by Councilwoman Ms. Park, and the reason for the planned demolition remained unclear, Ms. Paige said. The Times said the trust is not listed in property records alongside any person’s name.

Word that the gated, four-bedroom hacienda at the end of a cul-de-sac was slated to be torn down sparked expressions of outrage on social media, the Los Angeles Times reported. Ms. Park, whose council district includes Brentwood, said her office had received hundreds of calls urging her to take action to spare the house.

“For people all over the world, Marilyn Monroe was more than just a movie icon,” Ms. Park said at a news conference, calling the performer “a shining example of what it means to overcome adversity.”

The actress named the home Cursum Perficio, a Latin phrase meaning “My journey ends here,” which adorned tiles on the home’s front porch. — Reuters

Ghana’s 2022/2023 cocoa output expected to be off target by 11%

REUTERS

ACCRA — Cocoa output from the world’s second biggest producer Ghana for the 2022/2023 season is expected to miss by around 11% the target of 750,000 tons due to smuggling and illegal gold mining on farmland, sources told Reuters.

Ghana last week brought forward the closure of the 2022/2023 season by a month, and decided to start the 2023/2024 season on Sept. 8, a month earlier than usual, saying it needed to tackle disruptions in the internal marketing of cocoa.

Neither the government, nor the cocoa regulator COCOBOD, provided details about the disruptions.

Two sources, one from COCOBOD and the other from the state-run Cocoa Marketing Co. (CMC), told Reuters that Ghana’s cocoa output slumped due to increased smuggling to neighboring Ivory Coast and Togo where the beans fetched higher prices.

Around 50,000 tons of cocoa was lost through smuggling, the sources said. A director of a cocoa exporting company and a cocoa pod counter who both requested anonymity, said, however, that continuous illegal gold mining on farmlands in Ghana, known locally as galamsey, was to blame for Ghana’s falling cocoa output.

“The smuggling to Ivory Coast and Togo has been minimal and cannot explain everything. The problem is deeper, and the galamsey are to be blamed,” the director said.

For the 2023/24 season which is expected to start on Friday, Ghana’s cocoa regulator expects output to reach 800,000 tons, according to the COCOBOD source.

“Our projections are 800,000 tons for the new season. The weather conditions have been more favorable,” the COCOBOD source said.

COCOBOD will be seeking $1.2 billion to finance cocoa purchases for the 2023/2024 season, compared with $1.3 billion it raised in the previous season, the COCOBOD source and a source from the CMC said.

“We are looking for around $800 million from the private bank consortium and $400 million from the private sector for the 2023/24 season. We are confident that, as usual, we will receive more than we need because we have the trust of investors,” the CMC source said.

COCOBOD and Ghana’s government did not respond to requests for comment.

The optimism from the Ghanaian regulator is not shared by exporters and pod counters, who forecast 2023/2024 output at between 650,000 tons and 700,000 tons due to the impact of galamsey mining, which has led to the destruction of cocoa plantations in the past three years.

“I am not as optimistic as the CMC and COCOBOD about this year’s production. We have been observing a decrease every year for the past three years, and it is lasting because the plantations are entirely destroyed by gold miners,” another director of a cocoa exporting company said.

“These plantations are not being replaced,” the director added. — Reuters

40 companies join Manila FAME’s Design Commune this year

One of Manila FAME’s main show features, the Design Commune serves as a showcase of brand new home, fashion, and lifestyle pieces that have been created under the product development program of the Center for International Trade Expositions and Missions’ (CITEM).

The 71st edition of the trade show will be held at the World Trade Center Metro Manila in Pasay City on Oct. 19-21.

For this year’s edition, local exhibitors collaborated with three Filipino designers who served as product specialists: Tony Gonzales, a creative director, consultant, and curator of various projects, such as the Pinyapel of the Design Center of the Philippines; and design duo Rita Nazareno and Gabriel Lichauco of Nazareno/Lichauco, who highlight contemporaneity and innovation in traditional craft and materials.

A total of 40 companies are included in the roster of the product development program, with more than 300 newly developed products.

To register as a buyer, visit https://fameplus.com/registration/buyer-registration.

Yields on gov’t debt rise

YIELDS on government securities (GS) traded in the secondary market increased last week as inflation accelerated last month, pushing yields higher.

GS yields, which move opposite to prices, climbed by 4.29 basis points (bps) on average week on week, based on PHP Bloomberg Valuation Service Reference Rates as of Sept. 8 published on the Philippine Dealing System’s website.

Rates were mixed last week as yields on the 91-, 182- and 364-day Treasury bills (T-bills) declined by 5.28 bps, 0.11 bp and 7.02 bps to 5.6553%, 5.9867%, and 6.193%, respectively. 

Meanwhile, the belly of the curve went up as yields on the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) rose by 4.11 bps (6.2274%), 6.13 bps (6.2582%), 9.04 bps (6.2950%), 11.9 bps (6.3383%), and 12.89 bps (6.4154%), respectively.

At the long end, the rates of the 10-, 20-, and 25-year debt papers also increased by 10 bps (6.4936%), 2.89 bps (6.6532%) and 2.65 bps (6.6551%), respectively.

Total GS volume traded on Friday fell to P13.63 billion from P31.13 billion a week earlier.

Yield movements last week were mostly inflation-related, a bond trader said in a Viber message.

“The market sentiment shifted last week after the BSP (Bangko Sentral ng Pilipinas) released its inflation range of 4.8% to 5.6%, representing a lower bound that was already higher than July and indicated a higher month on month figure as well,” the bond trader said.

Globally, yields remained elevated with US Federal Reserve officials still uncertain on their policy path, the bond trader added.

“The market reverted to defensiveness through the week as it digested what the August inflation figure implies moving forward and [that the BSP governor] has already indicated that inflation will likely stay above the target range for the fourth quarter,” the bond trader said.

Noel S. Reyes, chief investment officer for Trust and Asset Management Group at Security Bank Corp., said the market started the week defensively given higher global yields.

“Latest CPI (consumer price index) data, which was worse than consensus and further increases in global yields,… added to the defensive tone,” Mr. Reyes said in an e-mail.

Headline inflation quickened for the first time in seven months to 5.3% in August, up from 4.7% in July but slower compared with the 6.3% print a year earlier.   

The CPI settled within the BSP’s 4.8-5.6% forecast range and marked the 17th consecutive month that inflation surpassed the central bank’s 2-4% target.

Year to date, inflation averaged 6.6%, still above the BSP’s full-year forecast of 5.6%.

BSP Governor Eli M. Remolona, Jr. last week said inflation is expected to return within the central bank’s target by the first quarter of 2024.

He added that the central bank may hike its inflation forecast of 5.6% for 2023 at their Sept. 21 meeting.

“GS yields will likely remain elevated for an extended period of time since higher inflation expectations will probably push back the BSP’s timeframe to start cutting rates,” the bond trader said.

The trader added that the Monetary Board will likely keep rates unchanged at its meeting, but continue to signal a readiness to tighten if inflation will continue to persist.

For this week, the bond trader expects the market to trade sideways and take its cue from the result of this week’s bond auction.

The government will offer P30 billion in reissued seven-year bonds on Tuesday that have a remaining life of six years and 10 months.

“Although inflation remains a concern, market participants have become used to that already and will just try and ride out the volatility for now,” the bond trader added.

Mr. Reyes said yields may continue to move sideways as the market awaits the Fed’s Sept. 19-20 meeting and the BSP’s own review a day after.

“Recent inflation was supply-side driven and should not be a factor for MB (Monetary Board) to turn on a hawkish bias during the meeting. Core inflation was lower and supports keeping the policy unchanged. If ever the MB moves, it will be to guard against pressures on the peso if the Fed raises another time,” he added. — A.M.P. Yraola

Philippine Labor Force Situation

The unemployment rate in the Philippines inched up to 4.8% in July, bringing the number of jobless Filipinos to 2.27 million, the Philippine Statistics Authority (PSA) said on Friday. Read the full story.

Philippine Labor Force Situation

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