RATES OF government securities on offer this week will likely move sideways on signals of a pause in monetary easing.

The Bureau of the Treasury (BTr) on Monday will offer P20 billion in Treasury bills (T-bills), broken down into P5 billion each for 91- and 182-day papers and P10 billion via 364-day instruments.

On Tuesday, the BTr will auction off P30 billion worth of reissued five-year Treasury bonds (T-bonds) with a life of five years and two months.

Two bond traders interviewed Friday said average rates for the T-bills will likely edge sideways.

The first trader gave a forecast range of 2.95-3.15% for the five-year T-bonds, while the second trader expects its rate to settle between 2.9% and 3.1%.

“Yields are perceived low by the market and without any further guidance on policy, yields continue to move sideways,” the second trader said via Viber.

Last week, the BTr raised P20 billion as planned in its sale of T-bills as total bids hit P82 billion.

It awarded P5 billion in 91-day papers at an average rate of 2.035%, slightly lower than 2.038% in the previous auction on June 8.

It also raised P5 billion as planned via the 182-day instruments, yielding an average rate of 2.101%, which was slightly higher than the previous 2.099%.

For the 364-day T-bills, it borrowed P10 billion at a lower average rate of 2.35% and raised another P10 billion later that day via the tap facility.

The last time the BTr offered five-year papers was on May 27 when it raised P30 billion at a lower average rate of 2.676% and another P20 billion via the tap facility.

At the secondary market on Friday, the three-month and six-month papers were quoted at 2.155% and 2.233%, while one-year and five-year notes fetched rates of 2.598% and 2.957%, respectively, according to the PHP Bloomberg Valuation Service Reference Rates.

“Bond players were seen trimming positions in the past week due to expectations that BSP (Bangko Sentral ng Pilipinas) could keep its policy rate unchanged this coming Monetary Board meeting,” the first trader said via Viber

The BSP Monetary Board will review its policy settings anew this Thursday.

BSP Governor Benjamin E. Diokno early this month signaled that benchmark interest rates will likely be kept at current levels in the meantime as inflation continues to ease, with latest print settling at 2.1% in May.

The overnight reverse repurchase rate is currently at 2.75%, while the overnight lending and deposit rates are at 3.25% and 2.25%, respectively.

According to the first trader, offerings of short-term papers will still be met with strong demand as liquidity remains robust in the market.

The second trader supported this, saying “without any hints on future policy, demand will be more on the short tenors but there’s still a lot of cash in the market so that keeps a cap on yields towards the long end of the curve.”

The government plans to borrow P170 billion from the local market in June: P110 billion via weekly T-bill auctions and the remaining P60 billion in T-bonds to be offered fortnightly.

The state borrows to fund its budget deficit which is now seen to hit 8.1% of gross domestic product. — Beatrice M. Laforga

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