GOVERNMENT SECURITIES on offer this week will likely fetch higher rates, with demand expected to continue focusing on the shorter tenor amid lingering concerns over domestic inflation.
The Bureau of the Treasury (BTr) is offering P15 billion worth of Treasury bills (T-bills) today. Broken down, the Treasury plans to raise P4 billion and P5 billion through the three-and six-month papers, respectively, and another P6 billion in one-year T-bills.
Tomorrow, the government will also offer P10 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of six years and eight months.
In a phone interview, a trader said yields on the six-month and one-year T-bills could “go up by five to 10 basis points from the previous auction.”
Last week, the Treasury partially awarded the P15-billion T-bills, borrowing only P13.4 billion out of the P30 billion tendered by investors.
The government made a full award in 91- and 182-day papers, although it only accepted just P4.4 billion out of the P6 billion it wanted to raise for the 364-day debt papers. Rates of the six-month and one-year papers picked up to 4.045% and 4.67%, respectively, while the average yield of the three-month paper slid to 3.404%.
“However, we still see demand on the 91-day T-bills so the yield will likely just stay the same on Monday,” the trader said.
Meanwhile, for the seven-year bonds, the rate is expected to climb 10 to 20 basis points from the previous auction, according to the trader.
Another bond trader noted bids for the seven-year papers will climb to the 6.3-6.5% range.
The government made a partial award of the seven-year bonds when they were last offered on June 13, raising just P7.6 billion out of the programmed P10 billion. The papers fetched an average rate of 5.976%, 11.1 basis points higher than the 5.865% fetched the previous auction.
“The demand will not be strong [for the T-bonds] on the back of higher inflation concerns,” the second trader said.
At the secondary market on Friday, the three-month, six-month and one-year T-bills fetched 3.2777%, 4.0085% and 4.6327%, respectively, while the seven-year T-bonds were quoted at 6.349%.
The government reported earlier this month that headline inflation accelerated to a fresh five-year high of 5.2% in June.
The first trader said the market is expecting the monetary authority to raise interest rates anew at its upcoming meeting following the uptick in June inflation print.
The BSP has raised its rates twice this year, with the recent one occurred in June. Its policy setting now stands at a 3-4% range. — Karl Angelo N. Vidal

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