By Karl Angelo N. Vidal
RATES OF the government securities on offer this week will likely move sideways amid ample demand after the local central bank both kept interest rates and banks’ reserve levels steady during its latest meeting.
The Bureau of the Treasury (BTr) is offering P20 billion worth of Treasury bills (T-bill) today, broken down into P6 billion each for the three- and six-month instruments and another P8 billion in one-year papers.
The BTr will also offer on Tuesday reissued seven-year Treasury bonds (T-bond) amounting to P20 billion with a remaining life of six years and 10 months.
A trader interviewed said rates of the T-bills on offer will likely move sideways from the previous auction.
The BTr made a partial award of the T-bills offered last week, borrowing just P13.4 billion out of its P20-billion program at its auction on Monday.
Rates of the 91-, 182- and 364-day papers picked up slightly to 5.786%, 5.987% and 6.052%, respectively.
Meanwhile, another trader said the T-bills on offer today may remain steady or move lower by 10 basis points (bp), as the market “might see some demand” for the papers.
For the T-bonds, the first trader expects it would fetch an average rate between 6% and 6.125%, while the other gave a 5.95-6.05% range.
In January, the government made a full award of the seven-year bonds it placed in the auction block, borrowing P20 billion as planned out of the P66.917 billion worth of tenders raked in. The seven-year notes fetched a 6.25% coupon rate.
At the secondary market on Friday, the three-month, six-month and one-year papers fetched a rate of 5.751%, 5.921% and 6.081%, respectively, while the rate of seven-year IOUs stood at 5.981%.
“As the BSP (Bangko Sentral ng Pilipinas) kept its policy rates and RRR (reserve requirement ratio) untouched, we might see some demand for the T-bills,” the first trader said in a text message on Friday.
The central bank kept borrowing costs steady on Thursday, saying it was not yet time to start reversing the 175 bps it fired off in 2018, as it flagged risks to economic growth this year even as inflation has been easing steadily.
From a nine-year peak of 6.7% in September and October, inflation has steadily dropped to 3.8% in February, the lowest in a year and returning to the BSP’s 2-4% target range.
The BSP also adjusted its full-year forecast to three percent from 3.1% previously.
Meanwhile, the central bank also kept the RRR untouched during its last meeting, as it considers the timing of reducing banks’ reserve requirement from the current 18%.
“The seven-year bonds may get good demand as well especially for end user clients,” the trader added.
Meanwhile, the other trader said the rates of the T-bills will move sideways given the abundance of supply.
“There is still a lot of supply because of the weekly Treasury bill auctions. There’s not a lot of breathing room for market participants, so the tendency for the rates is to move sideways,” the trader said.
For this quarter, the government is planning to borrow P360 billion from the domestic market. Some P240 billion will be borrowed this quarter through 12 weekly T-bill auctions. On the other hand, P120 billion worth of T-bonds will also be issued through six fortnightly auctions.