Global Stocks decline as US Treasury yields jumped higher.

· Investors took profit and sold high-tech stocks on valuation concerns as bond yields spiked higher.

· Inflation expectations are rising as consumer spending recovers in the backdrop of ongoing central bank stimulus.

· With the rise in yields, bonds may offer better current income versus stocks whose valuations rose recently due to higher earnings expectations and low rates.

· The higher the yield on bonds, the more investors may favor investing into bonds than equities.

· Equities will continue to be moved by vaccine roll-outs that are likely to spur growth in the economy. As developed economies receive their vaccines first, global equities may benefit first from the economic recovery.

· MSCI ACWI +3.22% year-to-date, +1.71% week-to-date.

Philippine Stocks continued to decline in the week of February 22 on the decision to remain in GCQ until there is a vaccine, delay in vaccine rollout, and the threat of rising inflation. An increase in interest rates also partly caused healthy profit-taking in local and global stock markets.

· The decision to not loosen the country’s community quarantine restriction to MGCQ created negative sentiment on a potential slowdown in economic recovery given the lack of vaccine rollouts and unchanged community quarantine restrictions, which tend to hamper mobility.

· Pork prices contributed to rising inflation.

· Equity investments may temporarily underperform but long-term earnings growth will be better as the economy recovers when the country reopens.

· A silver lining during this pandemic is greater awareness among Filipinos of the need for protection and investment.

· PSEi -5.38% year-to-date, -1.37% week-to-date

Philippine Bond yields climbed last week on market expectations of faster inflation in the coming months.

· Heightened inflation expectations is a primary factor for last week’s yield movement, and the market also reacted to the volatility in US Treasuries.

· On a real-yield perspective, peso bonds would not be attractive but that doesn’t mean peso bonds will be a significant underperformer.

· The faster than anticipated inflation rise may turn out to be short lived given that overall consumer spending and demand remain weak. This allows the BSP to keep an accommodative monetary policy, and therefore limiting any substantial increase in bond yields.

· Rates are expected to remain low given the government continues to support the economic recovery by continuing BSP’s open-market operations to cushion yield spikes.