Rates of T-bills, bonds to move sideways amid steady demand

RATES of government securities may move sideways or drop this week as demand is seen to remain steady amid excess liquidity in the financial system.

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

On Wednesday, it will auction off P35 billion in reissued five-year Treasury bonds (T-bonds) with a remaining life of four years and two months.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the recent maturity of T-bonds worth over P100 billion have added excess liquidity to the system, which could lead to the easing of yields.

“Higher US or global bond yields recently after more hawkish signals on possible more Fed rate hikes even every Fed meeting and possible reduction of the Fed’s balance sheet or bond holdings, partly led some excess funds to park at short-term tenors for the meantime,” Mr. Ricafort said in a Viber message.

Meanwhile, a trader said T-bill yields could trend sideways, while the reissued five-year securities could fetch a rate around 4%-4.15%.

“There was a jump in government securities yields on a week-on-week basis as market players reacted to the Fed and Philippine gross domestic product news,” the trader said in a Viber message. “But we already know that market is still liquid so this somehow tempers each sell-off.”

US Federal Reserve Chairman Jerome H. Powell on Wednesday said the central bank may raise interest rates starting in March, although the pace of later rate hikes is yet to be decided, Reuters reported.

Meanwhile, Philippine gross domestic product (GDP) in the fourth quarter grew by 7.7% for a full-year 2021 5.6% expansion, preliminary government data showed.

This is a reversal of the 9.6% contraction in 2020, but is still lower than the pre-pandemic GDP growth of 6.1% seen in 2019.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 0.7562%, 1.0737%, and 1.4404%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Four-year bonds, the closest benchmark to the remaining life of the reissued papers to be auctioned off on Tuesday, fetched a yield of 3.8154%.

The government raised P15 billion as planned via the T-bills it auctioned off last week.

Broken down, the Treasury raised P5 billion as programmed via the 91-day securities from P27.98 billion in bids. The average rate of the three-month debt paper went down by 18.2 basis points (bps) to 0.693% from 0.875% previously.

The government also borrowed P5 billion as planned through the 182-day instruments on Monday from P27.86 billion in tenders. The six-month T-bill’s average rate fell by 2 bps to 1.0777% from 1.097% a week earlier.

Lastly, the Treasury bureau made a full P5-billion award of the 364-day papers as bids reached P20.53 billion. The average yield on the one-year securities stood at 1.41%, down by 0.5 bp from 1.415% the week before.

Meanwhile, the last time the government offered the five-year T-bonds to be auctioned off on Tuesday was on Jan. 11, where it raised P22.126 billion, less than the programmed P35 billion.

The debt papers were awarded at an average rate of 4.012%.

The Treasury plans to raise P200 billion from the domestic market in February, 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 capped at 7.7% of gross domestic product this year. — Jenina P. Ibañez with Reuters