TREASURY BONDS (T-bonds) on offer tomorrow will likely fetch flat to lower yields, as uncertainties linger at home and offshore amid geopolitical concerns.

The government plans to raise as much as P15 billion in fresh funds at tomorrow’s auction of the reissued 10-year T-bonds with a remaining life of nine years and eight months.

A trader interviewed by phone on Friday said bids by banks for the T-bonds on offer will likely be flat to lower, tracking the dollar-peso exchange rate on Tuesday and amid heightened uncertainties in Europe and at home.

“The indication for now is yields could range around 4.65% to 4.75% since we still see drivers on the performance of the dollar-peso trade by Tuesday. If the peso’s weakness against the dollar continues to persist tomorrow, it could possibly affect bids during the auction,” the trader said.

The peso ended at P51.49 versus the greenback on Friday, slumping 13.5 centavos from Thursday’s session. Its finish was the local unit’s weakest close in nearly 11 years or since it ended at P51.60 a dollar on Aug. 24, 2006.

The trader added that geopolitical concerns in the country and abroad could continue affecting rates sought by financial institutions at tomorrow’s auction.

“Geopolitical risks here and abroad could also be factors, but this will be mostly driven by uncertainties abroad particularly on the Barcelona attack,” the trader said.

Reuters reported over 100 people were injured while 13 were killed after a suspected Islamic State militant drove a van into crowds in Barcelona, Spain last Thursday.

The T-bonds on offer tomorrow were first issued on May 4 with a coupon rate of 4.75%.

At the fixed-income exchange market on Friday afternoon, the 10-year debt papers were last quoted at 4.9918%.

At its auction on June 13, the state raised P15 billion as planned from the reissued 10-year debt papers with a remaining life of nine years and 10 months, which fetched an average yield of 4.692%.

Meanwhile, another trader said on Friday that yields for the reissued paper “should be around 4.6% to 4.7%.”

Asked what factors could contribute to lower rates for the 10-year T-bonds, the trader said, “Mostly dependent on risk appetite. Right now, risk aversion because of Washington.”

“Local factors also include market players waiting for clarity from the Treasury bureau regarding Marawi bonds, which will mean additional supply to the system,” the trader said.

Finance Secretary Carlos G. Dominguez III had announced earlier this month that they are mulling to issue P30 billion in “patriotic” bonds, and ordered the Treasury bureau to study the proposal. Funds to be raised will go to the repair of public and private infrastructure in Marawi City.

National Treasurer Rosalia V. de Leon, however, had said they are looking at a five-  to seven-year tenor for the Marawi bonds, noting they will finalize the proposal soon.

In the latest shake-up in Washington, the White House said President Donald J. Trump on Friday fired chief strategist Steve Bannon, known as an economic nationalist and an advocate of “America First” policies. Critics have accused him of harboring anti-Semitic and white nationalist sentiments.

The news followed a week heavy with speculation and focus on the White House. On Thursday, there was concern about the possible departure of National Economic Council Director Gary Cohn; on Wednesday, Mr. Trump disbanded some business councils.

Mr. Trump also alienated some corporate leaders and US allies this week with his comments following violence in Charlottesville, Virginia, where there was a white nationalist protest against the removal of a Confederate statue.

Meanwhile, asked if there is investor appetite for the long-termed papers to be auctioned off on Tuesday, one trader said, “It looks like there’s sufficient appetite because the market remains to be liquid.”

In contrast, another trader said, “Not so much because of risk backdrop and more issuance from the government, particularly the Marawi bonds.”

The government plans to borrow as much as P195 billion from domestic sources this quarter — through offerings of P105 billion worth of Treasury bills and P90 billion in Treasury bonds — more than the P180 billion programmed in the second quarter. — Janine Marie D. Soliman with Reuters

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