RATES OF government securities on offer this week will likely move sideways as demand remains strong on the back of ample cash in the financial system.

The Bureau of the Treasury (BTr) will offer on Monday P20 billion worth of Treasury bills (T-bills) — P5 billion each in 91-day and 182-day papers and P10 billion in 364-day securities.

The government is also looking to borrow P30 billion via reissued 10-year bonds on Tuesday with a remaining life of four years and 10 months.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the rates of the T-bills on offer this week may inch sideways as investors remain liquid.

“We expect rates for the T-bills and other shorter-dated issues to move sideways given the still copious amount of liquidity moving in the system,” Mr. Mapa said in an e-mail over the weekend.

A trader said the rates of the short-tenored papers may end five basis points (bps) lower or remain flat as the market is still awash with cash.

The government made a full award of the T-bills it offered on Monday as rates inched down across the board amid strong liquidity in the market and expectations of manageable inflation.

The BTr borrowed P20 billion as planned via T-bills last week as the offer was almost four times oversubscribed, with tenders amounting to P79.908 billion.

Broken down, the BTr awarded the programmed P5 billion in 91-day papers as bids reached P20.91 billion. The three-month T-bills fetched an average rate of 1.088%, down by 2.8 bps from the 1.116% seen in the previous auction.

The government also borrowed P5 billion as planned from the 182-day T-bills as tenders reached P24.286 billion. The six-month securities were quoted at an average rate of 1.598%, inching down 0.2 bp from the 1.6% logged in the previous offering.

The Treasury likewise made a full P10-billion award of 364-day debt papers as bids climbed to P34.712 billion. The one-year T-bills fetched an average rate of 1.793%, declining by 0.7 bp from the 1.8% seen in the previous auction.

At the secondary market on Friday, the three-month, six-month and one-year T-bills fetched yields of 1.19%, 1.601% and 1.812%, respectively, based on the PHL Bloomberg Valuation Service (BVAL) Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, Mr. Mapa said the rate of the reissued 10-year T-bonds on offer on Tuesday will likely fall close to the secondary market level for the five-year papers — the tenor closest to the remaining life of the issue.

“We expect it to track prevailing BVAL rates given that even the belly of the curve is moving in tight ranges given liquidity conditions and lack of alternatives,” he said.

“The only movement along the curve we’ve noted of late was a slight steepening of the curve, with inflation expected to pick up in the coming quarters as the economy continues to reopen,” Mr. Mapa added.

The 10-year papers on offer on Tuesday were originally issued on Sept. 9, 2015 with a coupon of 3.625%. They were last offered on June 23 where the BTr awarded P30 billion as planned at an average rate of 3.182% as total bids reached P80.581 billion.

The five-year T-bonds fetched a yield of 2.642% at the secondary market on Friday.

The Treasury is looking to raise P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly T-bond auctions.

The government wants to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — KKTJ

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