Wow. Today's Philippine Bonds Selloffs Exhibit Intensifying Yield Curve Flattening!

Wow. The selloff in Philippine bond markets today seems to have spread to the entire yield curve spectrum, viz. from short end to long end!

All charts below from investing.com

Yields continue to spike in the short end, from the one and three months…

…to the 6 month and 1 year.

Again all of the above (with the exception of the 1 month) have now significantly exceeded the June 2013 Taper Tantrum levels…then a period of financial market turbulence. Yields of 1 month Philippine bills have now reached June 2013 highs.

But today’s yield spikes has been more intense in the mid end.

Two year and three year making pivotal substantial ‘catch up’ moves.

Four year yields has also been shown having a big move today. 

To much of a lesser extent, the 5 and 7 year bonds.

Meanwhile yields in the long end, particularly the 10 year and  20 year, posted moderate increases while the 25 year registered a material move.

Again the above demonstrates a general sell-off in  the Philippine bond markets.

The interesting part has been that, as I noted last week, “Philippine treasuries essentially represent a tightly held or controlled markets by the government and the domestic banking system” such that “for any strains in Philippine treasuries to emerge means that some formal economy institutions, perhaps in the financial sector, have already been feeling pressures.”

Also an even more curious development has been that yield surges from the short end (1 year and below) seems to have now spread to the middle maturities  (2-4 years) relative to the longer end (10-25 year). This underscores of the intensification of the dramatic flattening of the yield curve of Philippine bond markets

In short, today’s actions exhibits escalating signs of a scramble for liquidity!!!

Yet how will the BSP react to the current developments? Will they infuse money to the banks?

Will they suspend operations in support of the peso as exhibited by the rapidly depleting Gross International Reserves and for those inflows (e.g. personal remittances) that didn’t turn up in the GIRs (as previously discussed)? 

In short, will the BSP save the banks at the expense of the peso? Has it now reached a case of a damned if you, damned if you don’t?

You see, all those façade made to exhibit how “transformational” or how “this time is different” this credit fueled phony boom has been, seems as being unglued.

And this appears to be happening at the most sensitive aspect of the Philippine financial markets.

The irony has been that statistical inflation has been declining yet rising yields implies of pressures on interest rates!!! Why???

Soaring bond yields comes in the face of exploding credit growth, declining statistical economic G-R-O-W-T-H and a sharply decelerating money supply growth rate! Where has all the money from the explosion of credit growth been funneled to??? Mostly to paying debt, perhaps??? Borrowing to rollover debt has now segued into a frantic jostle for short to medium term funds even at higher rates???

For the generally controlled domestic bond markets, why has there been deepening signs of wilting under financial pressures? Who among the financial institutions have been feeling the heat? Does the stock market know? Has the rigging of the index been designed to raise cash by drawing greater fools into momentum to pave way for the operators to gain from spreads to pay off heavy debt burdens? Has today's bond selloff and the 3 week dramatic tightening of the yield curve been circumstantial evidence of the unraveling of Hyman Minsky's Ponzi finance?

Warren Buffett once said, only when the tide goes out do you discover who’s been swimming naked. 

What happens when the liquidity and credit tide ebbs, will bubble industries and the bubble stock market be exposed as swimming naked?