Manulife Investment Management (MIM) expects the yield curve in the fixed income market to remain stable should the Bangko Sentral ng Pilipinas (BSP) keep its key interest rate at 5 percent at its rate-setting meeting on Thursday.
Jean de Castro, MIM head of fixed income, said a surprise rate cut could flatten the yield curve, spur demand for long-term bonds, and support loan growth—but also raise risks tied to the peso and on food prices.
“The Monetary Board’s cautious stance underscores its intent to preserve policy flexibility amid ongoing local and global uncertainties,” de Castro said.
She advised investors to adopt a dual strategy: remain flexible with short-term investments while selectively locking in long-term yields.
With inflation seen returning to the BSP’s 2 to 4 percent target range by end-2025, de Castro warned of lingering upside risks from food supply shocks and potential peso depreciation beyond the 58:$1 level.
She added that while one more BSP rate cut is possible before year-end, persistent weak foreign direct investment could keep fixed income yields elevated. A turnaround, she noted, would require progress on infrastructure and reforms to boost market confidence and liquidity.
