RATES OF government securities on offer this week may be slightly lower ahead of the release of June’s inflation data.

The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Monday, broken down into P5 billion each in 91-, 182- and 364-day debt papers.

On Tuesday, the BTr is looking to raise P35 billion from its offering of reissued seven-year Treasury bonds (T-bonds) with a remaining life of six years and nine months.

A bond trader said yields on government securities traded sideways last week as investors stayed on the sidelines ahead of the June inflation data to be released on Tuesday.

Inflation may have eased slightly in June amid improving food supply conditions and lower transport prices, analysts said.

A BusinessWorld poll of 14 analysts held last week yielded a median estimate of 4.3% for June headline inflation, matching the midpoint of the 3.9% to 4.7% estimate given by the Bangko Sentral ng Pilipinas (BSP) for the month.

If realized, June would mark the sixth consecutive month that inflation went beyond the BSP’s 2-4% target and would also be faster than the 2.5% print logged in the same month last year. Still, the month’s headline print would be slower than the 4.5% logged in May.

The central bank last month raised its inflation outlook for this year to 4% from the previous forecast of 3.9%.

For this week, two traders expect the rates of the T-bills on auction to likewise move sideways or up to five basis points (bps) lower on the back of strong demand as investors still prefer the short-term debt as uncertainties linger due to the ongoing coronavirus pandemic.

For the seven-year T-bonds, the first trader sees the rate ranging from 3.525% to 3.6%, while the second trader gave a narrower forecast band of 3.525-3.575%.

“While the market players are on the hunt for yields on a relatively low interest rate environment, you have the seven-year reissuance which would offer a slight yield pickup compared with securities at the short end of the curve,” the first trader said.

The Treasury last week made a full P15-billion award of the T-bills it auctioned off as rates dipped across the board. Total bids reached P53.567 billion.

Broken down, the BTr borrowed P5 billion as planned via the 91-day T-bills at an average rate of 1.031%, down from the 1.078% fetched at the June 28 auction.

It also raised the programmed P5 billion from the 182-day debt after the tenor’s average rate fell to 1.332% from the previous week’s 1.348%.

For the 364-day securities, the Treasury made a full P5-billion award at an average rate of 1.562%, lower than the 1.563% seen previously.

Meanwhile, the last time the government offered the series of seven-year bonds on offer on Tuesday was on May 18, when it raised P35 billion as planned from P84.305 billion in total bids.

The notes fetched an average rate of 3.678% at that auction, higher than the 3.625% coupon.

The Treasury is looking to raise P235 billion from the local market this month: P60 billion via weekly offers of T-bills and P175 billion from weekly auctions of T-bonds.

The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of gross domestic product. — BML