T-bills, T-bonds to fetch higher rates on GDP data

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YIELDS ON THE government securities on offer this week will likely inch up ahead of the fourth-quarter gross domestic product (GDP) data which will be released on Thursday.

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

On Tuesday, the BTr will also attempt to raise P30 billion via seven-year reissued Treasury bonds (T-bonds) which have a remaining life of six years and 24 days.

Sought for comment, a bond trader said on Friday that the rates of the T-bills on offer will likely go up by around 10 to 15 basis points (bps), while the seven-year T-bonds may also fetch higher rates.

At the T-bill auction last week, high rates across the board prompted the Treasury to award just P16.875 billion out of the P20-billion program. Specifically, the three- and six-month papers fetched average rates of 3.328% and 3.587%, respectively, while the one-year securities’ yield was at 3.896%.

Meanwhile, the bond trader said the seven-year papers may fetch rates between 4.575% and 4.65%, higher compared to the 4.322% quoted when the tenor was last offered in Oct. 29.

“We think the rates (of T-bills) will go up by 10-15 bps ahead of the fourth quarter GDP for 2019. [For the T-bonds,] we see it at 4.575%-4.65%. [The market is pricing in the release of] fourth- quarter GDP [data] for now and also to take positions, hence the higher rates, so they can position themselves now, in January,” the trader said via phone.

At the secondary market on Friday, the three-month, six-month, and one-year T-bills fetched yields of 3.298%, 3.489% and 3.825%, respectively, according to the PHP Bloomberg Valuation Service Reference Rates. Meanwhile, the seven-year bonds were quoted at 4.626%

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort shared the same sentiment, saying the market will look out for the release of GDP data this week.

“Government securities auction yields for this coming week could go up, after local benchmark yields in the secondary market mostly went up by as much as +0.10 week-on-week,” Mr. Ricafort added.

The Philippine Statistics Authority will report on Thursday fourth-quarter and 2019 GDP data.

Socioeconomic Planning Secretary Ernesto M. Pernia last week said the economy might have expanded by around “6.6-6.7%” in the fourth quarter to boost the full-year average and hit the 6-6.5% official target.

If realized, fourth quarter’s performance will outpace the previous quarter’s print of 6.2% and will also be faster than the 6.3% recorded in the last three months of 2018.

An at least 6.6% GDP growth print will be the fastest expansion rate in more than two years or since the seven percent logged in the third quarter of 2017.

The economy grew by 5.6%, 5.5% and 6.2% in the first, second and third quarters of 2019, respectively, bringing the average GDP growth to 5.8% for the nine-month period.

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