RATES OF government securities on offer this week could decline in line with the lower yields at the secondary market.

The Bureau of the Treasury (BTr) on Monday will auction off P10 billion in Treasury bills (T-bills), broken down into P2 billion in 91-day debt papers, P3 billion in 182-day instruments, and P5 billion in 364-day securities.

The government will also offer P20 billion in reissued seven-year bonds with a remaining life of six years and eight months on Tuesday.

“I think yields for T-bills will move about 5 basis points (bps) down and yields for the reissued 7-year notes will range from 4.45% to 4.65%,” a trader said in a Viber message.

“It appears that investors started purchasing securities towards the long end of the curve after the BTr rejected all bids for the 10-year notes last week,” the trader added.

The BTr last week rejected all bids for its offer of reissued 10-year T-bonds, even as tenders reached P42.44 billion.

Had the BTr fully awarded the offer, the tenor’s average yield would have declined by 5.9 bps to 5.071%. However, this would have been higher than the 4.99% quoted for 10-year bonds at the secondary market before the auction.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that government securities on offer this week may see lower rates as they track secondary market yields.

Yields on government securities at the secondary market mostly declined last week following the release of November inflation data. Rates fell by an average of 1.05 bps week on week, based on the PHP Bloomberg Valuation Service (BVAL) Reference Rates of Dec. 10 published on the Philippine Dealing System’s website.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills were quoted at 1.2039%, 1.4505%, 1.6774%, respectively, based on the PHL BVAL Reference Rates.

Meanwhile, the seven-year bonds fetched a yield of 4.5843%.

The BTr made a full P10-billion award of the T-bills it offered last week. The securities fetched bids worth P41.285 billion, more than four times the offer and also beating the P37.65 billion in bids seen a week earlier.

Broken down, the government sold the programmed P2 billion in three-month securities with tenders amounting to P13.3 billion. The tenor saw its average rate slip by 0.9 bp to 1.155% from 1.164% in the prior auction.

Meanwhile, the BTr raised P3 billion as planned through the 183-day debt papers as bids hit P16.012 billion. The six-month instruments fetched an average rate of 1.443%, down by 0.6 bp from 1.449% a week earlier.

The government also borrowed P5 billion as programmed via the one-year T-bills as demand hit P11.973 billion. The 365-day T-bills fetched an average rate of 1.643%, up by 0.7 bp from 1.636% previously.

On the other hand, the Treasury partially awarded its offer of reissued seven-year bonds on Oct. 26, raising P19.315 billion. The papers, which had a remaining life of six years and nine months at that auction, fetched an average rate of 4.468%, higher by 26.1 bps than the 4.207% quoted when the series was last offered on Oct. 5.

For this month, the government is looking to raise P70 billion via the local market: P30 billion from T-bills and P40 billion through T-bonds.

It wants to raise P3 trillion from local and external sources this year to help fund a budget deficit that is expected to hit 9.3% of economic output. — L.W.T. Noble