RATES OF government securities on offer this week could move sideways as investors remain cautious, with the country’s recovery prospects still fragile.

The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Monday, broken down into P5 billion each in 91-, 182- and 364-day debt papers.

On Tuesday, the BTr will offer P35 billion in reissued 25-year Treasury bonds (T-bonds) with a remaining life of 19 years and 26 days.

A bond trader said the average rates of the T-bills could move sideways, while the 25-year notes’ yield could end between 4.85% and 5%.

“Negative quarter-on-quarter GDP (gross domestic product) growth confirms the need for lower rates to be sustained and short-term maturities will remain in favor. [Meanwhile], [this] week’s 25-year auction might solicit higher yields as a result,” Security Bank Corp. Chief Investment Officer for Trust and Asset Management Group Noel S. Reyes said via Viber on Friday.

The Philippine Statistics Authority on Tuesday reported that the economy exited recession after 15 months as GDP grew by 11.8% in the second quarter, mainly due to base effects from the record 17% decline a year earlier. This brought first-half growth to 3.7%, still below the government’s 6-7% target.

However, GDP fell by 1.3% quarter on quarter in the April to June period against the first three months of 2021.

Socioeconomic Planning Secretary Karl Kendrick T. Chua attributed the quarter-on-quarter decline to the strict lockdown imposed in Metro Manila and nearby provinces from late March to mid-April, when coronavirus infections surged anew.

The economy now has to grow by at least 8.2% in the second half to meet the low end of the government’s 6-7% target for the year.

Metro Manila and other parts of the country are currently under lockdown again amid a resurgence in cases due to the more contagious Delta variant of coronavirus disease 2019 (COVID-19).

The Health department reported 14,249 new COVID-19 cases on Saturday. Active infections were at 98,847.

The BTr last week raised P15 billion as planned via its offer T-bills from P54.855 billion in tenders.

Broken down, it borrowed P5 billion as programmed via the 91-day papers at an average rate of 1.064%, up from the 1.053% fetched at the Aug. 9 auction.

The Treasury also raised P5 billion as planned via the 182-day T-bills. The average rate of the six-month debt inched up to 1.407% from 1.401% previously.

Lastly, the government made a full P5-billion award of the 364-day securities it offered last week at a slightly lower average rate of 1.625% from 1.632% the week prior.

Meanwhile, the last time the BTr offered 25-year bonds on the auction block this week was in June 1, when it raised P35 billion as planned from P61.914 billion in bids. The T-bonds fetched an average rate of 5.084%, lower than the 5.341% quoted in the last successful offer of the papers on Nov. 25, 2019.

At the secondary market on Friday, the rates of the 91-, 182- and 364-day T-bills stood at 1.107%, 1.409% and 1.64%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the 20-year tenor, the nearest benchmark for the remaining life of the 25-year bonds on offer on Tuesday, was quoted at 4.883%.

The Treasury is looking to raise P200 billion from the local market this month: P60 billion via weekly offers of T-bills and P140 billion from weekly auctions of T-bonds.

The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of GDP. — B.M. Laforga