RATES of government securities on offer this week could fall on continued rejections made for Treasury bond (T-bond) auctions amid the state’s comfortable cash position

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 T-bonds with a remaining life of four years and two months.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill rates could fall after the Treasury again rejected bids for T-bonds last week.

“Moreover, the latest P300-billion Bangko Sentral ng Pilipinas lending to the National Government would also reduce the need for the latter to borrow from the market or less crowding out effects that could still support some easing in Treasury bill auction yield,” he said in a Viber message.

Mr. Ricafort said this could also temper any rise in T-bond rates as US Treasury yields went up after more hawkish signals from the Federal Reserve.

US Treasury yields on Friday surged to a two-year high after minutes of a Federal Reserve meeting suggested rate hikes earlier than anticipated, Reuters reported.

Meanwhile, a trader said the market will face two opposing factors.

On one hand, the coronavirus disease 2019 (COVID-19) surge has prompted the government to declare stricter lockdown rules, which could lead to lower yields.

On the other, rising oil prices, a stronger US dollar, and the anticipated faster Fed rate hike could lead to higher yields.

“We’ll see which one has an upper hand specially if Omicron overwhelms healthcare system,” the trader said in a Viber message.

Metro Manila and neighboring provinces are under the stricter Alert Level 3 until Jan. 15 amid the rising COVID-19 cases in the areas.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.0073%, 1.1623% and 1.5626%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the four-year bonds, the closest benchmark to the remaining life of the reissued papers to be auctioned off on Tuesday, fetched a yield of 3.8043%.

The government raised P15 billion as planned via the T-bills it auctioned off last week.

Broken down, the Treasury raised the programmed P5 billion via the 91-day debt papers from P24.14 billion in bids. The three-month T-bill fetched an average rate of 1.075%, down by 5 basis points (bps) from the 1.125% seen at the previous offering.

The BTr also borrowed P5 billion as planned from the 182-day securities it offered on Monday as bids reached P24.32 billion. The average rate of the six-month T-bill plummeted by 15.9 bps to 1.269% from 1.428% previously.

Lastly, the government made a full P5-billion award of the 364-day T-bills as the tenor attracted tenders worth P22.59 billion. The average yield on the one-year instrument stood at 1.6%, falling by 4.9 bps from the 1.649% fetched previously.

Meanwhile, the last time the Treasury auctioned off the reissued five-year T-bonds on offer on Tuesday was on Nov. 3, when it raised P35 billion as planned as tenders reached P46.65 billion.

The government plans to borrow P200 billion from the domestic market this month, or P60 billion via T-bills and P140 billion from T-bonds. — Jenina P. Ibañez with Reuters