Rates of T-bills, bonds likely to climb further

YIELDS on government securities on offer this week are expected to move higher as market participants await for the policy meetings of the local and US central banks.
The Bureau of the Treasury (BTr) is offering P15 billion worth of T-bills today, broken down into P4 billion, P5 billion and P6 billion for three-month, six-month and one-year debt papers, respectively.
The government will also offer P15 billion in reissued seven-year bonds tomorrow with a remaining life of six years and three months. The papers carry a 5.75% coupon rate.
A bond trader said the rates of the T-bills on offer today will likely move sideways, while another said the three- and six-month papers may still move by around 5-10 basis points (bp).
Last week, the BTr made a full award of the T-bills on auction, borrowing P15 billion as planned, as market players expected inflation to decelerate.
Rates of 91- and 182-day debt moved sideways to 5.394% and 6.305%, respectively, while the 364-day notes declined to 6.507%.
“I think the one-year bills plateaued already. It will not climb anymore. It’s just the six- and three-month [papers that still have a bit of] an upside at around 5-10 bps,” the second trader said.
For the T-bonds, the first trader expects the rate of the seven-year security to go up, fetching a yield between 6.9% and 7.1%.
The BTr borrowed P15 billion as planned via seven-year bonds when it was last issued on Nov. 27, with total tenders reaching P62.227 billion.
It fetched an average yield of 6.974%, down 11.1 bps from the 7.085% tallied when the papers were last awarded in September.
“An uptick in the T-bonds is expected since this (the auction) is additional supply on top of the scheduled borrowing. Supposedly, the 10-year bonds will be the last T-bond auction for this year, but this is already an additional supply,” the first trader said.
The second trader concurred, saying that the Treasury is set to conduct another bond auction to take advantage of the market appetite at lower rates.
“So far, there’s still demand even after the BTr reopened their tap facility. What I think is more of at what rate will the market come in,” the second trader said, expecting the bonds to fetch a rate between 6.95% and 7.05%.
The first trader, on the other hand, added that market participants are closely watching the Dec. 13 policy meeting of the Bangko Sentral ng Pilipinas as well as the US Federal Open Market Committee (FOMC) meeting from Dec. 18-19.
The local monetary authority is widely expected to keep its policy rates steady during their final meeting for this year as investors see signs of decelerating inflation.
Last month, inflation decelerated to 6% driven by slower price increases in food and drinks. This came from a nine-year high of 6.7% recorded last October and September.
Meanwhile, St. Louis Fed President James Bullard called for the US central bank to take a break from its interest rates, saying the policy rate’s current level is “about right.”
The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in Treasury bonds. — Karl Angelo N. Vidal