RATES OF government securities on offer this week are expected to drop amid a sluggish global economic outlook due to emerging risks, which has prompted investors to flock to safe assets.

The Bureau of the Treasury (BTr) will offer P20 billion worth of Treasury bills (T-bills) on Monday, broken down into P6 billion each for the 91- and 182-day T-bills and P8 billion via the 364-day securities.

On Tuesday, the Treasury will look to raise P30 billion via five-year Treasury bonds (T-bonds) with a remaining life of four years and seven months. The tenor was changed to five years from the initial plan to offer three-year papers, which the BTr said is meant to spread its debts in different tenors after it raised P310.8 billion via three-year retail Treasury bonds last month.

A bond trader said over the weekend that rates of the T-bills will likely decline by at least 10 basis points (bps), while the yield on the five-year securities may range within 4.05-3.95%.

“Same reason (for both tenors), growth outlook just deteriorated for the global economy as travel restrictions, work stoppages and less discretionary spending sends global yields to drop on flight to safe haven,” the trader said in Viber message.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., likewise expects the T-bills’ rates to decline by around five basis points, while yields on the five-year notes may settle within 4-4.1% level.

The Treasury fully awarded the P20-billion T-bills it auctioned off last week as rates of the 91- 182- and 364-day papers declined to 3.003%, 3.365% and 3.787%, respectively.

For the five-year T-bonds, the tenor fetched a coupon rate of 4.25% after the issue was first offered on Oct. 16 last year. The BTr raised P20 billion as planned during that auction.

At the secondary market on Friday, the five-year notes were quoted at 4.117%, while the rates for three-month, six-month and one-year securities were at 3.076%, 3.407% and 3.846%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

Mr. Ricafort said local benchmark yields were again mostly lower week on week as benchmark yields in US and globally continued to decline.

He attributed this to “increased global market risk aversion with the huge sell-off in US/global stock markets and some shift to the safest assets such as US Treasuries/fixed-income markets amid lingering concerns that the coronavirus (COVID-19) could spread to other countries worldwide and could further slow down global economic growth.”

As the number of infected cases continue to rise and spread across the globe, the Philippine government has imposed temporary travel bans to most affected countries in an attempt to contain the COVID-19.

The most recent one was a ban on Filipino tourists going to South Korea imposed late last week after confirmed cases there shot up. Authorities have earlier imposed temporary travel bans to and from mainland China, where majority of cases were recorded, as well as for Hong Kong and Macau.

COVID-19 has killed more than 2,900 and infected over 85,000 people across the globe, with majority of which in China.

The World Health Organization recently placed the risk and impact of the new disease, which has yet to have an antidote or vaccine, at a “very high” global level.

Think tanks and economists have said the impact of the disease will likely drag global economic growth as attempts to contain it, such as travel prohibitions, and growing fears of contracting it have stalled economic activities for affected countries.

Back home, the country’s businesses were not immune as affected businesses reported a slowdown in sales and demand. Philippine Airlines announced last week it will likely lay off 300 workers as part of its business restructuring plans to recover business losses.

Mr. Ricafort said the market will also take its cue from February inflation data due on March 5, as this could affect local interest rates.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via T-bonds.

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — Beatrice M. Laforga

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