RATES of government securities on offer this week could decline as investors look ahead to the US Federal Reserve’s first policy meeting for this year, where they expect a smaller increase in borrowing costs.

The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Monday, made up of P5 billion each in 91-, 182-, and 364-day papers.

On Tuesday, it will offer P35 billion in reissued 10-year Treasury bonds (T-bonds) that have a remaining life of nine years and seven months.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that T-bill yields may drop by 10 basis points (bps) from the previous award, while the T-bond could fetch rates of 6.10 to 6.20% to track secondary market levels and amid expectations of a 25-bp hike from the Fed next week.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion also said that the 10-year bond’s rate may range from 6.10% to 6.20% as investors make bets ahead of the US central bank’s first policy meeting for this year, which will be held from Jan. 31 to Feb. 1.

“The upcoming Federal Open Market Committee meeting with Fed officials talking up the terminal policy rate while blurring the timing of the Fed’s pause may put pressure on markets to lock in gains as we approach the end of the month,” Mr. Asuncion said.

Meanwhile, a trader said in a Viber message that T-bill yields may remain steady in this week’s auction and T-bond rates may range from 6.10% to 6.20% following the broad decline in secondary market yields as “investors have been deploying excess funds.”

Slower US consumer inflation and other weak data released in recent weeks, as well as dovish comments from central bank officials, have fueled bets that the Fed could dial back its tightening, with a 25-bp hike seen in its first meeting of the year.

The US central last month hiked its federal funds rate by just 50 bps to a 4.25%-4.5% range following four straight 75-bp increases. This brought cumulative hikes for 2022 to 425 bps.

Meanwhile, at the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 4.312%, 4.9977%, and 5.4531%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

On the other hand, the 10-year bond fetched a yield of 6.2196%.

Week on week, the 91- and 182-day T-bills saw their secondary market rates drop by 7.67 bps and 4.7 bps, respectively, while the 364-day paper’s yield went up by 4.01 bps.

The 10-year bond also dropped by 27.96 bps week on week.

Last week, the BTr raised P15 billion as planned from the T-bills it auctioned off as bids reached P45.891 billion, more than thrice the amount on offer.

Broken down, the Treasury raised P5 billion as programmed via the 91-day T-bills with tenders reaching P16.321 billion. The average rate of the three-month papers rose by 1.8 bps to 4.25%, with accepted rates ranging from 4.23% to 4.27%.

The government also made a full P5-billion award of the 182-day securities as bids for the papers reached P15.2 billion. The six-month tenor was quoted at an average rate of 4.967%, inching up by 0.8 bp, with accepted rates at 4.95% to 4.989%. 

Lastly, the BTr raised the programmed P5 billion from the 364-day debt papers as demand for the tenor reached P14.37 billion. The average rate of the one-year T-bill rose 5.5 bps to 5.448%. Accepted yields were from 5.429% to 5.493%.

Meanwhile, the 10-year bonds to be auctioned off on Tuesday were first offered on Sept. 13, 2022, where the BTr made a full P35-billion award of the fresh issue. The bond series fetched a coupon rate of 6.75%, with the average at 6.703%.

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

The government borrows from domestic and external sources to finance its budget deficit, which is expected to reach P1.47 trillion this year or 6.1% of gross domestic product. — A.M.C. Sy