RATES of government securities on offer could ease this week amid excess liquidity in the financial system.

The Bureau of the Treasury (BTr) will offer P15 billion in Treasury bills (T-bills) on Monday, or P5 billion each in 91-, 182- and 364-day securities.

On Tuesday, it will auction off P35 billion in fresh 10-year Treasury bonds (T-bonds).

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said T-bill yields could ease in response to excess liquidity and the effects of slower inflation.

“The National Government’s cash position increased after P300-billion borrowing from the Bangko Sentral ng Pilipinas (BSP) as well as the retail Treasury bond issuance that could reduce the need for the government to borrow/crowd out in the local market,” he said.

Meanwhile, a bond trader said T-bill yields could drop by 5 to 10 basis points (bps), while bids for the new 10-year notes could range between 4.7% to 5.1%.

“It appears demand for government debt will remain at the short end with end users still purchasing T-bills. However, demand for notes especially those at the long end of the curve may not be as robust despite inflation coming in lower than expected and the BSP Governor saying that a rate hike is unlikely in the first half of 2022,” the trader said in a Viber message.

“This may be because investors are focusing on developments abroad such as the Fed looking to hike rates three to four times this year.”

Headline inflation in December eased to 3.6%, its lowest in a year, from the 4.2% recorded in November as food and transport costs slowed.

The December print brought the 2021 average to a three-year high of 4.5%, breaching the 2-4% target of the central bank as well as its revised 4.4% forecast.

US Federal Reserve Governor Lael Brainard last week said interest rate hikes could start as soon as the US central bank ends its bond purchases, which is set for March.

The International Monetary Fund said emerging economies should prepare for a US Fed policy tightening that could rattle financial markets.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 0.9438%, 1.1246%, and 1.4809%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the 10-year bonds fetched a yield of 4.8243%.

The Treasury last week raised P15 billion as planned via the T-bills it offered as total tenders reached P73.58 billion, almost five times the initial offer and higher than the P71.05 billion logged a week earlier.

Broken down, the Treasury bureau raised P5 billion as planned via the 91-day securities from P23.7 billion in bids. The three-month debt paper fetched an average rate of 0.969%, down by 10.6 bps from the 1.075% seen previously.

The BTr also borrowed P5 billion as planned from the 182-day securities it offered on Monday from P24.98 billion in tenders. The average rate of the six-month T-bill fell by 14.8 bps to 1.121% from 1.269% previously.

Lastly, the government made a full P5-billion award of the 364-day debt papers as bids reached P24.9 billion. The average yield on the one-year instrument stood at 1.468%, down by 13.2 bps from the 1.6% fetched a week earlier.

The BTr plans to raise P200 billion from the domestic market this month, or P60 billion via T-bills and P140 billion from T-bonds.

The government borrows from local and external sources to help fund a budget deficit seen to hit 7.7% of gross domestic product this year. — Jenina P. Ibañez