Yields on government debt end mixed

YIELDS on government securities (GS) traded in the secondary market were mixed last week following the result of the Treasury’s bond (T-bond) auction and the release of the March domestic borrowing program.

Bond yields, which move opposite to prices, rose by an average of 2.71 basis points (bps) week on week, according to the PHP Bloomberg Valuation Service Reference Rates as of Feb. 23 published on the Philippine Dealing System’s website.

Total GS volume traded reached P13.022 billion on Thursday, lower than the P15.809 billion seen on Feb. 17.

Philippine financial markets were closed on Friday in commemoration of the People Power Revolution anniversary.

Yields at the short end of the curve rose. The rates of the 91-, 182-, and 364-day Treasury bills (T-bill) climbed by 2.20 bps, 14.78 bps, and 9.81 bps, respectively, to end the week at 4.4988%, 5.1415%, and 5.4464%.

The belly of the curve also increased as the rates of the two-, three-, four- and five-year T-bonds climbed by 7.5 bps (to 5.6531%), 6.36 bps (5.8007%), 3.88 bps (5.908%) and 0.97 bp (6%), respectively. However, the seven-year dropped 3.17 bps to fetch 6.1534%.

Meanwhile, yields on all tenors at the long end of the curve went down, with the 10-, 20- and 25-year papers declining by 4.57 bp (to 6.3178%), 3.51 bps (6.5374%), and 4.42 bps (6.533%), respectively.

The bond trader said investors were focused on the BTr’s T-bond auction and the release of March borrowing schedule.

“Since Tuesday’s auction was well-received, the market found support even as the country is still experiencing high inflation and the policy rate is expected to be higher. The market also reacted positively to the borrowing schedule as the BTr (Bureau of the Treasury) will borrow less in terms of weekly volume for bonds,” the bond trader said in a Viber message.

ATRAM Trust Corp. Chief Investment Officer Alessandra P. Araullo likewise said in an e-mail that the movement in local bond yields were also driven by reissuance of the 10-year paper, the settlement and trading of the new 5.5-year retail Treasury bonds and the March borrowing plan.

The BTr last week raised P35 billion as planned from its offer of reissued 10-year papers, with total bids reaching P92.254 billion.

The bonds, which have a remaining life of nine years and six months, were awarded at rates ranging from 6.199% to 6.3%, bringing the average to 6.258%, 34.5 bps higher than the 5.913% quoted for the bond when it was first offered on Jan. 24.

Meanwhile, the BTr announced last week that it plans to borrow P200 billion from the domestic market in March, unchanged from the original program for February. However, the February borrowing plan was reduced to P130 billion after the BTr canceled two T-bond auctions worth P35 billion each due to its RTB offering.

Broken down, it targets to borrow P75 billion from its weekly T-bill auctions and P125 billion via T-bonds.

The short-dated T-bills will be offered at P5 billion each with benchmark tenors of 91, 182, and 364 days. Auctions will be held on Feb. 27, March 6, 13, 20, and 27.

For the long-term securities, the Treasury plans to raise P25 billion from six-year T-bonds on Feb. 28, and P25 billion from 10-year T-bonds on March 7.

It also aims to generate P25 billion from the offer of 13-year instruments on March 14; P25 billion from 20-year bonds on March 21; and P25 billion from seven-year papers on March 28.

The BTr previously offered P35 billion in T-bonds in its weekly auctions.

On the other hand, the government raised P283.711 billion from its offering of 5.5-year RTBs. Of this total, the government raised P31.671 billion from the bond exchange component.

The bonds carry a coupon rate of 6.125% and are set to mature on Aug. 22, 2028.

“This week, we will look for cues from Tuesday’s auction on what type of term premium the market will demand for the six-year reissuance. This should set the tone for local interest rates ahead of the February CPI (consumer price index) print release and upcoming bond supply in March,” Ms. Araullo said.

“For this week, it remains to be seen if current levels will hold as inflation remains high and current policy rate is higher than some of the actively traded bonds,” the bond trader added.

On Tuesday, the Treasury will offer P25 billion in reissued seven-year T-bonds that have a remaining life of six years and two months.

The Philippine Statistics Authority will likewise release February inflation data on Tuesday. — Lourdes O. Pilar