T-bill, bond rates likely to drop

RATES of government securities on offer this week could decline as the market turns to safer assets anew amid the upcoming lockdown.

The Bureau of the Treasury (BTr) is looking to offer 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 auction off P35 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 11 months.

A bond trader on Friday said the T-bills could fetch lower yields from a week earlier following the announcement of stricter quarantine restrictions for Metro Manila.

Meanwhile, for the reissued T-bonds, two bond traders expect its average rate to range from 3.85% to 4%, or slightly lower than the 4% coupon fetched when the 10-year notes were first offered on July 21.

The Palace on Friday said Metro Manila will be placed under the tightest lockdown classification from Aug. 6 to 20 to prevent the further spread of the more infectious Delta variant of the coronavirus disease 2019 (COVID-19).

Socioeconomic Planning Secretary Karl Kendrick T. Chua on Friday said latest estimates show each week in lockdown costs the economy about P105 billion.

The Health department on Thursday reported 97 new Delta variant cases, bringing the country’s total infections of the more transmissible COVID-19 variant to 216.

On Saturday, the country logged 8,147 new COVID-19 cases, bringing the total to 1,588,965. Of this, 60,887 were active infections.

The Treasury last week borrowed P15 billion as planned via its offer of T-bills as it was oversubscribed by nearly three times, with tenders reaching P43.027 billion.

Broken down, the Treasury raised P5 billion as programmed via the three-month T-bills at an average rate of 1.05%, down from the 1.082% seen in the July 19 auction.

It also borrowed P5 billion as planned from the 182-day debt papers. The average yield on the six-month instruments inched up to 1.407% from 1.401% previously.

Lastly, the Treasury made a full P5-billion award of the 364-day securities at an average rate of 1.638%, slightly increasing from the 1.629% fetched the week prior.

Meanwhile, the BTr first auctioned off the T-bonds on offer on Tuesday on July 21, where it raised P35 billion as planned from tenders worth P72.956 billion for a 4% coupon rate.

At the secondary market on Friday, the rates of the 91-, 182- and 364-day T-bills ended at 1.1292%, 1.4293% and 1.6361%, respectively, while the 10-year tenor was quoted at 3.8795%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The first trader said the release of July inflation data will also be a key driver for the auctions this week.

The Philippine Statistics Authority will report official July inflation data on Aug. 5, Thursday.

A BusinessWorld poll of 15 analysts yielded a median estimate of 4% for July headline inflation on the back of lower prices of meat following the easing of import tariffs, which is seen to offset higher costs of oil and other food items.

If realized, this would be the first time inflation would fall within the 2-4% target of the central bank since the 3.5% headline print in December. This would also be slower than the 4.1% pace in June but still faster than the 2.7% logged a year ago.

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 gross domestic product. — L.W.T. Noble