YIELDS ON government securities on offer this week are seen to move sideways as market players price in improved inflation expectations following the monetary policy tightening last week.
The Bureau of the Treasury (BTr) is offering P15 billion worth of Treasury bills (T-bill) today, broken down into P4 billion, P5 billion and P6 billion for three-month, six-month and one-year debt papers, respectively.
The government will also offer P15 billion in reissued five-year Treasury bonds (T-bond) tomorrow with a remaining life of four years and three months. The papers carry a 5.5% coupon rate.
A bond trader said the rates of the T-bills on offer today will likely move sideways “reflecting the recent rate hike of the central bank.” Meanwhile, another trader expects yields to move 10-15 basis points (bp) from the previous auction.
Last week, the Treasury made a full award of P15-billion in short-dated bills as the market expects inflation to slow down in the coming months.
The 91-, 182- and 364-day papers were quoted at 5.172%, 6.245% and 6.521%, respectively.
Meanwhile, traders expect the yield on the five-year T-bond to decline from the previous auction, with the first one giving a 6.9-7.25% forecast.
“For the T-bonds, I expect it to have more demand but rates will likely be higher than the market,” the second trader said in a text message on Friday, giving a 6.8-7.1% range for the average yield.
“Improved inflation expectations due to the BSP’s (Bangko Sentral ng Pilipinas) revised forecast will play a role.”
The BTr made a partial award of the five-year bonds when it was last issued on Oct. 9. The government raised P9.74 billion versus total tenders reaching P15.73 billion. It fetched an average yield of 7.342%, surging 144 basis points (bp) from 5.902% tallied in the previous auction.
Based on the PHP Bloomberg Valuation Service Reference Rates, the 91-, 182- and 364-day papers were quoted at 5.298%, 6.104% and 6.532%, respectively, on Friday.
Meanwhile, the five-year debt was quoted at 7.128%.
During its Thursday meeting, the BSP’s policy-setting Monetary Board fired off another 25-bp hike in policy rates, following rate increases worth a cumulative 150 bps since May.
Following this, the central bank said it now expects inflation to clock in slower in the coming months, with price increases seen to settle below 4% over the next two years.
By next year, inflation is expected to settle at 3.5%, back within target and lower than the 4.3% previous estimate.
The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in T-bonds. — Karl Angelo N. Vidal

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