By Karl Angelo N. Vidal, Reporter
GOVERNMENT SECURITIES on offer this week will likely fetch higher rates, with the Bureau of the Treasury (BTr) expected to reject all bids for the 20-year papers, as investors continue to wait for the local central bank to raise interest rates anew.
The Treasury is offering P15 billion worth of Treasury bills (T-bills) today. Broken down, the government 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.
The government will also offer on Tuesday P10 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 19 years and six months.
Traders interviewed last week said the T-bills on offer today will likely fetch higher rates, with one saying yields will go up by five to 10 basis points across all tenors from the previous auction.
Last week, the Treasury opted for a full award of the T-bills, borrowing P15 billion as planned, with total tenders amounting to P32.9 billion.
Rates of the three-month paper slid to 3.219%, while the average yields on the six-month and one-year noted climbed to 4.235% and 4.809%, respectively.
The trader added that the 20-year bond auction on Tuesday could fetch higher yields to near 7.25%.
The BTr partially awarded the reissued 20-year T-bonds it offered on June 19, raising just P4.12 billion out of the planned P10-billion borrowing.
The bonds fetched an average rate of 6.979%, higher than the 6.85% average previously fetched as well as the 6.5% coupon rate.
However, another bond trader said the 20-year papers could be met with higher bids due to lack of interest from investors.
“I’m not hearing any interest for the 20-year bond,” the trader said in a text message. “Most likely, it will be just a repeat of previous auctions wherein bids are much higher.”
The government decided to reject all bids on the seven-year bonds it offered two weeks ago. Had the BTr decided to accept all bids, the papers would have fetched an average rate of 6.621%, 64.5 basis points higher than the 5.976% tallied in the previous auction.
“Most likely, the bids will be rejected…especially now that the market is anticipating another rate hike,” the bond trader added.
The Bangko Sentral ng Pilipinas (BSP) has been hinting of another rate hike during its next monetary policy meeting in August to quell inflation expectations.
In a speech at a reception for the banking community last Friday, BSP Governor Nestor A. Espenilla, Jr. said the monetary authority is “ready”to follow through the two rate hikes it has implemented.
“In the face of rising threats to inflation, we hiked policy rates last May and June. We are ready to follow through to secure our inflation target,” Mr. Espenilla said, adding that the central bank remains firmly committed to its primary mandate of price stability.
The government reported earlier this month that inflation accelerated to a fresh five-year high of 5.2% in June.
Last month’s inflation print surged from May’s 4.6% figure and beyond the 4.3-5.1% estimate range by the BSP and the 4.9% estimate of the Department of Finance.
The BSP’s policy rates currently stand within a 3-4% range.
Meanwhile, the first trader added that investors will likely factor in inflation expectations as well as the weak peso in their bids.