Rates of Treasury bills, bonds may rise on inflation concerns

RATES of government securities on offer this week may climb further as global oil price pressures fuel inflation fears.

The Bureau of the Treasury (BTr) is looking to raise P15 billion via the Treasury bills (T-bills) it will auction off on Monday, or P5 billion each in 91-, 182- and 364-day debt papers.

On Tuesday, the BTr will offer P35 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of six years and nine months.

A bond trader said T-bill yields will likely move up by 5 basis points (bps) compared with the previous auction, while the seven-year T-bond’s average yield could range from 4.4% to 4.7%.

“The persistent elevated global oil prices and continued weakness of US Treasury yields are continuing to feed market players’ hesitance to rush back in the local bond market,” the trader said in a Viber message.

Oil prices went up on Friday as power generators switched to fuel oil on worries about coal and gas shortage in China, India, and Europe, Reuters reported. Brent crude futures went up 92 cents or 1.1% to $85.53 a barrel.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill yields could move slightly higher in the coming week, reflecting the movement in the secondary market.

“Any slight uptick in T-bill auction yields could be tempered by the continued excess liquidity in the financial system as seen by the continued slight decline in the 28-day BSP (Bangko Sentral ng Pilipinas) securities auction yield, on top of the more dovish signals by monetary authorities,” Mr. Ricafort said in a Viber message.

Meanwhile, he said the T-bond yield would track movements at the secondary market, but this could be tempered by the BTr’s rejection of bids for last week’s offering and “more dovish signals from monetary authorities despite higher global oil prices among seven-year highs that could lead to some uptick in inflation.”

The Treasury last week rejected all bids for its offer of reissued T-bonds as investors asked for higher returns due to lingering inflation concerns.

At the secondary market, the 91- 182- and 364-day T-bills were quoted at 1.229%, 1.458% and 1.61%, respectively, while the seven-year tenor ended at 4.4736%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The government made a full award of the T-bills it offered last week as rates moved sideways after the country’s central bank chief said the regulator is unlikely to hike borrowing costs anytime soon.

Broken down, the BTr raised P5 billion as planned via the 91-day debt papers from P8.68 billion in bids. The three-month T-bills fetched an average rate of 1.113%, up by 1.8 bps from the 1.095% seen at the previous week’s offering.

The BTr also borrowed P5 billion as programmed from the 182-day T-bills as the tenor attracted tenders worth P16.868 billion. The average yield of the six-month instruments slipped by 0.1 bp to 1.39% from 1.391% previously.

Lastly, the government made a full P5-billion award of the 364-day securities it offered on Monday as bids reached P10.54 billion. The average rate of the one-year T-bills stood at 1.604%, up by 1.7 bps from the 1.587% quoted at the previous offering.

Meanwhile, the last time the BTr auctioned off the reissued seven-year T-bonds on offer on Tuesday was on Sept. 21, when it made a full P35-billion award of the papers from P76.128 billion in tenders.

The debt papers fetched an average rate of 3.826% at that auction, higher than the 3.789% quoted for the papers previously and its 3.75% coupon.

The BTr is looking to raise P200 billion from the local market this month: P60 billion from weekly offers of T-bills and P140 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. — Jenina P. Ibañez