The Bloomberg Calls On The Peso
Please do observe that since 2014, declining bank credit expansion has led to bumper real yields.
Bumper real yields mean that the National Government hasn’t benefited from the inflation tax.
The National Government’s record massive cash hoarding was partly responsible for that.
Headline statistical inflation did play a role, although hardly anyone had seen the growing divergence between the core and the headline.
Finally, the great global bond boom, which sent yields tumbling, likewise had a role.
In sum, NG's cash hoard, disinflation, liquidity crunch, lower growth, panic buying treasuries equals bumper real yields!
But recent data showed that the BSP has monetized the NG’s fiscal deficit last September, sending its QE to a record high!
If the BSP has jumpstarted the second leg of its secret weapon, how long before the USD Php sniffs the return of inflation?
The Philippine Treasury market correctly predicted the burst of and the subsequent slowdown in inflation, could they be wrong this time?
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