RATES of government securities may inch up this week on inflation concerns and hawkish signals from the US Federal Reserve.

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, it will offer P35 billion in reissued five-year Treasury bonds (T-bonds) with a remaining life of four years and five months.

Two bond traders said T-bill rates will likely continue to move sideways, with the first trader adding that there could be a slight upward bias from the previous auction.

“Demand may continue to be evident across the three tenors with investors still looking to park their excess liquidity at the immediate part of the curve,” the first trader said in a Viber message.

For the longer-tenored T-bonds, the first trader said the average rate of the five-year notes on offer on Tuesday could range from 3.25% to 3.35%, while the second trader gave a higher estimate band of 3.35% to 3.55%.

Both traders said dealers are awaiting more signals from the US Federal Reserve on the timing of its plan to taper its monthly asset purchases.

The Fed has said it could start reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected.

At home, the traders said the market remains concerned over elevated inflation.

“Some…inflationary pressures such as the rise in global oil prices and Meralco’s (Manila Electric Co.) power rate hike announcement this month have kept the market off the edge, with local bond yields adjusting higher,” the first trader said.

Headline inflation stood at 4.8% in September, slowing from the 4.9% logged in August but faster than the 2.3% print recorded in the same month last year, the Philippine Statistics Authority reported last week.

September’s inflation print hit the lower end of the Bangko Sentral ng Pilipinas’ 4.8%-5.6% forecast range that month.

Average inflation for the first nine months reached 4.5%, above the central bank’s 2-4% target and 4.4% forecast this year.

Meanwhile, Reuters reported on Friday that oil prices rose as industries switch to oil from high price gas and on doubts that the US government would release oil from its strategic reserves. US West Texas Intermediate crude futures went up 1.1% to $79.14 a barrel, while Brent crude futures climbed 1% to $82.75 a barrel.

The BTr made a full award of the T-bills it offered last week even as rates climbed across the board due to lingering inflation fears.

Broken down, the government raised P5 billion as planned via the 91-day debt papers from P13.01 billion in bids. The three-month T-bills fetched an average rate of 1.085%, up by 2.5 basis points (bps) from the 1.06% seen the week before.

It also borrowed the programmed P5 billion via the 182-day T-bills as the tenor attracted bids worth P22.42 billion. The six-month paper’s average yield rose by 0.6 bp to 1.391% from 1.385% a week earlier.

Lastly, the Treasury made a full P5-billion award of the 364-day debt papers from P20.93 billion in tenders. The one-year securities fetched an average rate of 1.584%, climbing by 0.2 bp from the 1.582% quoted at the previous week’s offering.

Meanwhile, the last time the BTr auctioned off the reissued five-year T-bonds on offer on Tuesday was on Sept. 1, when it made a full P35-billion award of the papers from P76.167 billion in tenders.

The debt papers fetched an average rate of 2.746% at that auction, dropping by 54.9 basis points from the 3.295% logged in the previous offering. This was also lower than the 3.375% coupon for the series.

The BTr is looking to raise P200 billion from the local market this month: P60 billion from 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 gross domestic product. — Jenina P. Ibañez with Reuters