SHORTER-DATED government securities on offer this week are seen to fetch lower yields as investors track the movement of US Treasuries while waiting for the next move of the Bangko Sentral ng Pilipinas (BSP).
The Bureau of the Treasury (BTr) is offering P15 billion worth of Treasury bills (T-bills) today. Broken down, the Treasury plans to raise P5 billion and P4 billion through the three- and six-month papers, respectively, and another P6 billion in one-year T-bills.
The government will also offer P10 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 10 months.
A trader said in an interview on Friday that yields on the T-bills are seen to move sideways or lower as market appetite is still on the short-dated tenors.
“The 91- and 182-day [bills] might be lower by five basis points [from the previous auction],” a trader said over the phone, noting there is “strong demand on the shorter-dated papers.”
The rate of the 364-day papers, meanwhile, is seen to move sideways due to tepid demand.
“The one-year T-bills might be awarded partially,” the trader added.
Last Tuesday, the government borrowed P11.236 billion via T-bills out of the P15 billion it offered as investors sought higher returns for the one-year tenor. Full awards were made for the 91- and 182-day T-bills worth P5 billion and P4 billion respectively, fetching average rates of 3.451% and 3.934%.
However, demand was low for the 364-day papers as tenders only reached P3.146 billion versus the P6 billion programmed by the government. The BTr only accepted P2.236 billion from investors, capping bids at 4.35%. The one-year paper was quoted an average yield of 4.226%, higher than the 3.986% seen a week earlier.
At the secondary market on Friday, the 91-day T-bills were quoted at 3.4549%, while the 182-day papers fetched 3.914%. The rate of the 364-day securities closed at 4.1601%.
Meanwhile, the traders expect the rate of the 10-year bonds to likewise move sideways.
The first trader said the 10-year bonds are seen to fetch an average rate between 6-6.25%, while another bond trader gave a slightly slimmer 6.05-6.25% range.
The government raised P10 billion from the reissued 10-year bonds auctioned off on April 17 with an average rate of 6.213% and a 6.25% coupon.
At the secondary market last week, the 10-year T-bonds fetched a 6.7446% yield.
The second trader said in a text message that market players “will likely give higher bids as…US Treasuries are now at a seven-year high.”
The yield on 10-year US Treasuries picked up to a seven-year high as traders and investors have not reached a consensus whether it is time to buy or if the market is susceptible to more selling, Reuters reported.
“Investors will be tracking the move of the US Treasuries, as it’s now at its highest since 2011. That will be factored in the market bids,” the first trader said.
The first trader added investors are “waiting for other catalysts such as firmer leads as the next step of the Bangko Sentral [ng Pilipinas] of possible cut in reserve [requirements] or another rate hike.”
The BSP’s Monetary Board raised policy settings by 25 basis points during their third review for the year. Yields now stand at 3.75% for the overnight lending rate, 3.25% for the overnight reverse repurchase rate, and 2.75% for the overnight deposit rate.
However, BSP Deputy Governor Diwa C. Guinigundo has said the 25 basis point hike is enough to temper the rising inflation.
“In terms of moving again the interest rate, I think at this point… the 25bp increase, I think, is sufficient to keep the inflation reading at 3.4% for 2019,” Mr. Guinigundo said. “In short, we’re back to target-consistent path.”
Earlier this year, the monetary authority also slashed commercial banks’ reserve requirement ratio by a percentage point to 19%, freeing up to P90 billion from the lenders’ vaults.
The Treasury is holding two auctions per week this quarter — one for T-bonds and another for T-bills — to reflect increased borrowing requirements.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — K.A.N. Vidal

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