T-bill, T-bond rates may inch up

THE RATES of the government securities on offer this week will likely increase ahead of the presidential election in the United States and as uncertainties linger due to the coronavirus disease 2019 (COVID-19).

The Bureau of the Treasury (BTr) will borrow P20 billion in via Treasury bills (T-bills) on Tuesday: P5 billion each in 91-day and 182-day papers and P10 billion in 364-day securities.

On Wednesday, it will auction off reissued three-year Treasury bonds (T-bonds) worth P30 billion. The papers have a remaining life of two years and 10 months.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the rates of the T-bills on offer will likely be steady amid expectations of benign inflation.

“Our trader senses muted October inflation at 2.3% year on year and a survey result of 2.4%, which is priced in and consistent with our benign inflation [forecast] for the rest of the year at 2.4%,” Mr. Asuncion said in an e-mail.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the rates of the short-term debt papers may move marginally as investors remain awash with cash.

Meanwhile, for the reissued three-year bonds, UnionBank’s Mr. Asuncion expects its average rate to increase by 5-10 basis points (bps) as investors consider the impact of the US presidential election on Nov. 3 on the local debt market.

“Local market will be distracted by offshore developments led by the US elections results. Yields are expected to trade with upside risks,” he said.

Mr. Asuncion added that demand for short-term bonds may strengthen amid a better economic outlook on the back of the possible victory of Democrat candidates in the US.

“Improved growth prospects next year reinforce duration cutbacks. Additional supply of three-year bonds in November doesn’t argue for a flatter belly,” he said.

The Treasury last week made a full award of its offer of T-bills, awarding P20 billion as planned as the auction was more than four times oversubscribed, with bids amounting to P81.825 billion.

Broken down, the BTr awarded the programmed P5 billion in 91-day papers as tenders reached P23.44 billion. The three-month debt fetched an average rate of 1.079%, down by 0.7 bp from the 1.086% seen at the previous auction.

The government borrowed another P5 billion as planned in 182-day T-bills as bids stood at P27.576 billion. The six-month papers were quoted at an average rate of 1.543%, declining by 5.4 bps from 1.597% previously.

The Treasury also made a full P10-billion award of the 364-day debt as bids reached P30.809 billion. The one-year T-bills fetched an average rate of 1.791%, inching down by 0.2 bp from the 1.793% quoted during the previous offering.

It also opened its tap facility and borrowed another P5 billion each in 182-day and 364-day papers.

Meanwhile, the government made a full P30-billion award of reissued three-year T-bonds on Oct. 6 as the offer was almost four times oversubscribed, with tenders reaching P114.488 billion.

The debt papers fetched an average rate of 2.182%, declining by 9.7 bps from the 2.279% in the Sept. 8 auction, where the series was first offered. The T-bonds have a coupon rate of 2.375%.

At the secondary market on Friday, the 91-day, 182-day and 364-day T-bills were quoted at 1.14%, 1.551% and 1.821%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website. On the other hand, the three-year T-bonds fetched a yield of 2.325%.

The Treasury plans to borrow at least P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly T-bond auctions. It will also look to raise at least P3 billion from an offering of Premyo bonds.

The government wants to raise 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