Philippines Sov:Sell long end $bonds

　　
In view of potential near-term politically-relatedvolatility, we recommend investors to Sell PHILIP longend $ bonds, as PHILIP Cash are still trading rich anddisregarding the widening in PHILIP 5y CDS.

　　
Due to political uncertainties, PHP depreciated by 2%over the past month. PHILIP 5y CDS also saw weakness,widening by 18bp in the past two weeks, see Chart 2.

　　
We believe uncertainty will persist in the short term.

　　Credit valuations

　　PHILIP $ bonds have enjoyed a pleasant rally year-todatebut currently reflect little volatility seen in thecurrency or the 5y CDS. In particular, the higher cashpriced long dated bonds have outperformed due to theirhigh yields.

　　
In contrast, with CDS c.20bp wider from the lows, weconsider the political uncertainty largely priced-in.

　　However, the $ bonds are now susceptible to widening,especially considering limited upside from year-to-datetight levels. We recommend investors to Sell PHILIP$ 2037, a high-cash priced bond with decent liquidity.