GOVERNMENT securities on offer this week will likely fetch lower rates on the back of strong liquidity in the market.

The Bureau of the Treasury (BTr) is set to raise P20 billion in Treasury bills (T-bills) on Monday, broken down into P5 billion each via 91- and 182-day debt papers and P10 billion from the 364-day T-bills.

On Tuesday, the BTr will offer P30 billion in fresh 10-year Treasury bonds (T-bond).

National Treasurer Rosalia V. de Leon said the T-bond tenor on offer on Tuesday was changed from the seven-year T-bonds penciled in earlier as investors want higher yields.

“Given low rate regime, investors looking for yields. So stretching tenors for higher rates. And we have not issued long tenors for sometime,” Ms. De Leon told reporters via Viber on Friday.

Two bond traders said the rates for the short-term securities will likely decline by five to 10 basis points (bps) from the yields fetched in the auction last week.

“T-bill rates for auction will likely move 5 to 10 bps lower from the previous auction amid continued demand for short-term papers given the elevated liquidity in the financial system,” the first trader said via Viber over the weekend.

Last week, the BTr upsized its T-bill award to P26 billion on the back of soaring bids totaling P131 billion, more than six times the P20-billion program.

It borrowed P7 billion via 91-day papers and P14 billion in 364-day T-bills, higher than the programmed P5 billion and P10 billion, respectively. Meanwhile, it fully awarded its P5-billion offer of 182-day T-bills.

Strong demand caused rates to drop across-the-board, with the three-month papers fetching an average yield of 1.746%, down from the 2.068% recorded at the June 22 auction.

The average rate of the six-month papers also declined to 1.892% from 2.159% previously, while the one-year securities fetched 1.98%, also lower than the 2.408% seen previously.

Meanwhile, the second trader said by phone that the fresh 10-year T-bonds to be offered on Tuesday may fetch a coupon rate of around 2.75-3%, while the first trader sees its yield settling at 2.625% or 2.75%.

“Market players will continue to bargain hunt for yields in the primary market as it’s seldom for the BTr to offer securities around the long-end of the curve nowadays,” the first trader said.

The last time the BTr offered the 10-year tenor was on Feb. 18. The offering of reissued bonds was met with tenders worth P83.5 billion, prompting the Treasury to make a full award of P30 billion and open the tap facility. The 10-year T-bonds fetched an average rate of 4.409% at that offering.

At the secondary market on Friday, the 91-, 182- and 364-day T-bills were quoted at 1.827%, 1.873% and 1.948%, respectively, while the 10-year T-bonds’ rate stood at 2.814%, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

The second trader said strong demand will persist, especially for the short-term securities, as liquidity in the market remains strong. However, the trader said demand for the 10-year papers might not be that strong but will remain ample.

The government has set a P205-billion borrowing program for July and will offer P145 billion in T-bills via weekly auctions and P60 billion in T-bonds to be auctioned off every other week.

It borrows from local and foreign lenders to plug its budget deficit seen to hit 8.4% of gross domestic product this year. — B.M. Laforga