GOVERNMENT SECURITIES on offer this week will likely fetch higher yields as investors await the policy meeting of the local central bank.
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 20-year Treasury bonds (T-bonds) with a remaining life of 19 years and eight months.
A trader said in an interview on Friday that yields on T-bills are seen to move higher by five basis points across all tenors from the previous auction, noting the one-year T-bills “might be partially awarded.”
Last week, the Treasury raised just P12.369 billion out of the P15 billion it intended to borrow via T-bills as yields bid by banks climbed across tenors amid slower-than-expected inflation logged last month.
Full awards were made for the 91-day and 182-day T-bills, fetching average rates of 3.296% and 3.714%, respectively.
However, the BTr only accepted P3.369 billion out of the P6 billion intended borrowing as well as the P7.839 billion total tenders. The average rate went up 7.8 basis points to 4.324% from the 4.246% posted last week.
On the other hand, the trader said the 20-year T-bonds on offer this Tuesday will fetch yields higher by “five to 10 basis points from the previous auction.”
“I’m looking at 6.15%-6.25% range,” another bond trader said.
In April, the Treasury raised just P4.26 billion out of the planned P10-billion borrowing from the reissued 20-year bonds. It fetched an average yield of 6.85% with a coupon rate of 6.5%.
“There will be less demand for sure, especially ahead of the MB (Monetary Board) meeting,” the second trader noted.
At the secondary market last Thursday, the three-month, six-month and one-year T-bills closed at 3.3059%, 3.6613% and 4.2891%, respectively, while the 20-year T-bond was quoted at 7.2893%.
In a BusinessWorld poll, six out of 10 economists expect the rate-setting MB to stay on hold at their June 20 meeting amid signs that inflation may be slowing.
Inflation accelerated further in May to its fresh five-year high at 4.6% from the 4.5% logged the previous month.
“The market will likely focus on the MB meeting rather than the Fed,” the second trader added.
Last week, the Federal Open Market Committee raised its benchmark rates by a quarter of a percentage point amid low unemployment and higher wages.
Aside from this, the first trader said investors will also factor in the weakening of the peso.
It plans to borrow P888.23 billion from local and foreign sources this year to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal