Rates of T-bills, bonds to rise as oil rally fuels inflation concerns

RATES of government securities may increase this week to reflect inflation pressures from a continued increase in global oil prices.

The Bureau of the Treasury (BTr) is looking to borrow P15 billion via the 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 10-year Treasury bonds (T-bonds) with a remaining life of five years and six months.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill rates could end slightly higher at today’s auction, while the 10-year bond yield could be close to the 4.94% fetched for the tenor at the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates published on the Philippine Dealing System’s website.

“Auction yields would still be higher for the coming week to reflect the latest week-on-week rise in the secondary market/PHP BVAL yields as global oil prices posted new seven-year highs as winter season approaches amid some disruptions in the global supply chain,” Mr. Ricafort said in a Viber message.

He said higher global oil, energy, and commodity prices due to supply chain disruptions could lead to some pickup in inflation.

Reuters reported on Friday that oil prices rose amid signs of strong demand and tighter supplies as industries switch to oil in response to higher gas and coal prices.

Meanwhile, a trader said T-bond rates could climb due to lower supply of certain tenors.

“Expect [T-bond rates] to try to breach the 4% as supply pressures persist on the five- to seven-year space,” a trader said in a Viber message.

The government made a full award of T-bills it offered last week as rates moved sideways as investors preferred to park their excess funds in safe-haven assets.

Broken down, the BTr raised P5 billion as planned from the 91-day debt papers from P11.37 billion in bids. The three-month T-bills fetched an average rate of 1.095%, up by 1 basis point (bp) from the 1.085% seen during the previous offering.

It also made a full P5-billion award of the 182-day T-bills as the tenor attracted tenders worth P18.36 billion. The six-month paper’s average rate was unchanged at 1.391%.

Lastly, the government borrowed the programmed P5 billion through the 364-day T-bills from P16.86 billion in tenders. The one-year securities’ average rate inched up by 0.3 bp to 1.587% from the 1.584% quoted at the previous offering.

Meanwhile, the last time the BTr auctioned off the reissued 10-year T-bonds on offer on Tuesday was on June 22, when it made a full P35-billion award of the papers from P65.091 billion in tenders.

The debt papers fetched an average rate of 3.185% at that auction, down 54.7 bps from 3.732% previously and lower than the 4.75% 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