Rates of Treasury bills, bonds seen mixed on inflation data

YIELDS on government securities on offer this week will likely end mixed as the market prices in faster-than-expected inflation in August.

The Bureau of the Treasury (BTr) will offer 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 will auction off P35 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 10 months.

Two bond traders said T-bill rates will continue to move sideways on ample demand as investors prefer safe assets like government debt due to a prolonged coronavirus pandemic.

“Rates of the bills will only move sideways since there is really a need to park the excess liquidity while the pandemic is ongoing,” the first trader said on Friday.

Meanwhile, the first trader sees the average rate of the 10-year T-bonds inching up to the 4.15%-4.25% range on Tuesday, while a second trader said the yield may be at around 4%.

“The average yield may rise, tracking the rate in the secondary market,” the first trader said.

The first trader said the faster-than-expected August inflation print will continue to drive yields at this week’s auctions.

The Philippine Statistics Authority reported on Tuesday that headline inflation quickened to 4.9% in August from 4% in July, its fastest pace in 32 months or since the 5.2% seen in December 2018. It was also higher than the 4.4% median estimate of analysts in a BusinessWorld poll.

This brought the eight-month average to 4.4%, above the central bank’s target of 2-4% and forecast of 4.1% for the year.

The BTr made a full P15-billion award of the T-bills it offered last week as rates moved sideways. Tenders for the offer reached P56.91 billion.

Broken down, the government raised P5 billion as planned via the 91-day T-bills at an average rate of 1.078%, a tad higher than the 1.077% seen on Aug. 30.

The Treasury also borrowed the programmed P5 billion from the 182-day T-bills as its average rate was unchanged at 1.405%.

Lastly, it made a full P5-billion award of the 364-day securities at an average rate of 1.609%, inching down from the 1.616% fetched for the tenor the week prior.

Meanwhile, the last time the BTr offered the 10-year notes for the auction block on Tuesday was on Aug. 3, where it raised P35 billion as planned via the reissued debt papers from P70.733 billion in bids.

The average yield on the 10-year bonds was at 3.914%. This was lower than its coupon rate 4% quoted when the notes were first offered on July 21.

At the secondary market on Friday, the 91-, 182- and 364-day T-bills were quoted at 1.145%, 1.409% and 1.639%, respectively, while the 10-year tenor fetched 4.135%, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System website.

The Treasury is looking to raise P250 billion from the local market this month: P75 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. — B.M. Laforga