RATES OF government securities on offer this week will decline further as investors’ flight to safer assets continues to fuel demand.

The Bureau of the Treasury (BTr) is set to borrow P20 billion via Treasury bills (T-bills) on Tuesday, broken down into P5 billion each for the 91- and 182-day papers and P10 billion via 364-day instruments.

On Wednesday, the BTr will auction off P30 billion in reissued five-year Treasury bonds (T-bonds) with a remaining life of four years and four months and a coupon of 4.25%.

A bond trader said over the weekend that rates of the T-bills will likely move “sideways to 10 basis points (bps) lower from previous auction” while for the reissued T-bonds, rates could settle within 2.8-2.9% range.

Security Bank First Vice-President and Head of Wholesale Treasury Sales Carlyn Therese X. Dulay said the T-bills could yield rates 5-10 bps lower as strong demand for government securities persists, with bids seen reaching “at least two to three times” more than the initial offer.

Last week, the Treasury hiked the volume of T-bills it awarded to P24 billion from the programmed P20 billion as total bids hit P103.8 billion.

It awarded P7 billion via three-month papers out of total tenders worth P29 billion, yielding an average rate of 2.09%, lower than the 2.269% fetched in the previous auction.

The Treasury raised another P7 billion in six-month papers from total bids of P33.7 billion at an average rate of 2.193%.

It likewise made a full award of the P10 billion in one-year securities on offer as total bids reached P40.77 billion and its rate declined to 2.653%.

Meanwhile, Ms. Dulay said the reissued five-year bonds could fetch lower rates between 2.7% and 2.8% on expectations of oversubscription.

The last time the BTr offered five-year securities was on March 3 where it raised P30 billion at a lower average rate of 4.018% from 4.227% previously.

The tenor attracted bids worth P83.511 billion at that auction, prompting the Treasury to award another P10 billion via the tap facility.

Kevin Palma, peso sovereign debt trader of Robinsons Bank Corp., said robust demand will pull down rates anew as robust liquidity in the market will cause investors to crowd safe-haven assets.

“Bond bulls were in the frontlines in the past few weeks. It’s because there’s so much liquidity in the financial system. That said, market players may continue to hunt for bargains on the short- to belly-end of the curve to put their excess cash to work to push GS (government securities) yields to multi-year lows,” Mr. Palma said via Viber on Saturday.

The government is planning to borrow P170 billion from the local market this month: P110 billion via its weekly T-bill auctions and the remaining P60 billion via T-bonds to be offered fortnightly. — B.M. Laforga