GOVERNMENT SECURITIES on offer this week will likely fetch slightly lower yields amid a lower rate environment globally and with the country’s central bank chief hinting on another cut in key rates as early as next quarter.

The Bureau of the Treasury (BTr) will auction off P20 billion worth of Treasury bills (T-bills) on Monday, broken down into P6 billion each for 91- and 182-day papers and P8 billion for the 364-day securities.

On Tuesday, the BTr will also look to raise P30 billion via reissued 10-year Treasury bonds (T-bonds) with a remaining life of eight years and 10 months.

For Dino C. Aquino, vice-president and Fixed Income Trading head at Security Bank Corp.’s Asset Management Group, yields on the 10-year papers could move with a downward bias and range between 4.325-4.375% or 4.4%, at most, while rates for the T-bills could also decline by around five to 15 basis points (bps).

Last week, the government fully awarded the T-bills it offered, raising P20 billion as planned from the sale of the short-term bonds.

It accepted P6 billion each as planned for the three- and six-month papers at average rates of 3.115% and 3.461%, respectively. For the one-year securities, P8 billion was awarded as programmed at an average yield of 3.908%.

Meanwhile, the Treasury accepted P20 billion as planned when the 10-year papers were last offered on Nov. 12, awarding the bonds at an average rate of 4.617%.

At the secondary market on Friday, the 91-, 182- and 364-day T-bills fetched yields of 3.199%, 3.449% and 3.904%, respectively, while the rate of the 10-year T-bond ended at 4.387%.

“Given the comments by the BSP (Bangko Sentral ng Pilipinas) Governor, we expect interest rates to have a downward bias next week. I suspect that there’s going to be more appetite this time given by the latest comment by the BSP Governor. So we might see banks might reposition after taking profit this year,” Mr. Aquino said over the phone on Friday.

BSP Governor Benjamin E. Diokno said on Friday that the central bank may cut rates by another 25 bps as early as the second quarter to shield the economy from the effects of the deadly coronavirus disease 2019 (COVID-19) outbreak.

The BSP Monetary Board will meet to discuss policy anew on March 19.

Mr. Aquino said they expect strong demand for the T-bills on offer today as investors flock to safer assets, with the outbreak threatening global growth prospects and also affecting financial markets.

“Stock market is pretty weak so I think most investors are looking at fixed-income assets as a venue for their investments to at least have a steady streamline of coupon instruments given the volatility that’s going on in the equity market. So I think for the time being, given that the COVID-19 is continuing to persist globally…rates could continue to be low globally. So that would bode well for our local bonds,” Mr. Aquino said.

Meanwhile, Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort said the yield on the 10-year papers could drop below the 4.3% level as “prospects of slower global economic growth and global inflation due to lingering concerns over the coronavirus disease could have led to slight easing in global and local interest rate benchmarks.”

The two analysts said the market’s continued reaction to the outlook upgrade by debt watcher Fitch Ratings to “positive” from “stable” will also drive yields lower.

“This could be positive for bonds because they also signal that we can have ratings upgrade in the next three to six months, most likely,” Security Bank’s Mr. Aquino said.

Fitch last week upgraded its outlook on the country’s credit rating to “positive” from “stable” while maintaining its grade at “BBB,” citing the country’s sound macroeconomic policy framework, strong growth and stable inflation environment.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via Treasury bonds. — Beatrice M. Laforga

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