Rates of T-bills, T-bonds to climb

By Elijah Joseph C. Tubayan, Reporter
YIELDS on longer-dated government securities will likely increase to track their US counterparts and bets of policy tightening both from the US and local central banks.
The Bureau of the Treasury (BTr) is offering P15 billion worth of Treasury bills (T-bills) today, broken down into P5 billion and P4 billion in three- and six-month papers, respectively, and P6 billion in one-year debt notes.
On Tuesday, it will also offer P20 billion worth of reissued 20-year Treasury bonds (T-bonds) with a remaining life of 19 years and 10 months.
Traders interviewed on Friday said yields on the 91-day T-bills will likely move sideways or decline by less than five basis points (bps).
“For the T-bills of course there would be excess demand for the three-month. But I guess it should be lower by five bps,” a trader said in a phone interview.
Another trader, however, said rates may “move sideways given that the previous auctions were already a bit high.”
Meanwhile, rates for the longer-dated 182- and 364-day papers as well as the 20-year bonds are expected to climb by at least 10 bps and demand may taper off as investors will likely continue to swarm the three-month debt notes.
“For the one-year, the yields would be at least 10 bps higher, and the 182-day also 10 bps higher. There’s not so much demand, even if you notice the past auctions. It’s really more focused on the three months,” the first trader said.
The second trader likewise forecasted the same increase for the six-month and one-year papers, noting the “possible rate hikes in the future both here and the US Fed,” while also citing “high inflationary expectations” in the Philippine economy mainly due to the tax increases introduced this year.
“So the market appetite is weak on the long-tenored notes,” the trader said.
A third trader, meanwhile, said the T-bonds on offer on Tuesday may fetch a 7-7.1% rate.
At the close of the secondary market on Friday, the 91-and 182- day T-bills fetched a 3.4761% and 3.6111% yield, respectively, while the rate of one-year papers stood at 4.2625%. The 20-year bonds, meanwhile, were quoted at 7.0929%.
The trader said the longer-dated tenors would follow the rise of US yields after the rate of the 10-year US Treasuries hit its highest level in four years.
“With this upside risk of the yields, all the more you wouldn’t want to lock in your funds in the long end,” the trader said.
The trader added that the “bid cover ratio would be lower.”
The government seeks to raise P325 billion this quarter from local creditors this quarter through weekly auctions of securities.
It is holding two auctions per week, one for T-bills and another for T-bonds, than the previous one auction per week as it increased its borrowing requirements for the period.