EconomyEditor's PickRates of Treasury bills, bonds may climb this week

November 7, 2021
BW FILE PHOTO

RATES of government securities could rise this week as yields at the secondary market climbed despite slower-than-expected inflation in October.

The Bureau of the Treasury (BTr) plans to raise P15 billion via the Treasury bills (T-bills) it will auction off on Monday, or 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 nine years and eight months.

Rates on the government debt to be auctioned off this week could track the slight climb in secondary market yields following the US Federal Reserve’s announcement of the start of the reduction of its $120-billion monthly asset purchases at $15 billion per month, despite inflation turning out lower than expected, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message over the weekend.

He said the three- to 10-year tenors posted the highest weekly rise, “reversing the previous week’s downward correction as the Fed finally announced details of the $15-billion tapering as widely expected, but an important signal for the market is the patient stance of the Fed before any rate hike, which supported market sentiment.”

Fed Chairman Jerome H. Powell last week said they could stay patient and keep rates low to support the economy as the job market remains weak.

Meanwhile, inflation eased to a three-month low in October amid a slower increase in food prices, the Philippine Statistics Authority reported on Friday.

Headline inflation settled at 4.6%, slower than the 4.9% median estimate of 21 analysts in a BusinessWorld poll.

The October figure was slower than the 4.8% in September, but faster than 2.5% a year earlier. Still, this was the third straight month inflation exceeded the 2-4% target of the Bangko Sentral ng Pilipinas (BSP) for the year. Inflation has topped the BSP target this year except in July.

This brought headline inflation for the first 10 months to 4.5%, faster than the 4.4% forecast by the central bank for the year.

On the other hand, a bond trader expects higher yields as the market awaits the results of this week’s auctions.

“The Fed taper and rates announcements were already priced in as it was well-communicated beforehand,” the trader said in a Viber message.

“What market is looking for now is how aggressive BTr will borrow in the coming auction after awarding the FXTN 5-77 at higher than forecast rates,” the trader said, referring to the last week’s auction where the government made a full P35-billion award of the reissued five-year papers even as its rate climbed.

The bonds, which have a remaining life of four years and five months, fetched an average rate of 3.762% on Wednesday, up by 18.6 basis points (bps) from the 3.576% quoted for the tenor during the previous auction.

Tenders reached P46.65 billion, higher than the offer but lower than the P56.08 billion in bids fetched the last time these debt papers were auctioned off on Oct. 12, where the government made a full award.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.2164%, 1.4427% and 1.655%, respectively, while the 10-year bond ended at 4.9573%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The government made a full award of the T-bills it auctioned off last week even as rates inched up ahead of the release of inflation data.

The BTr raised P15 billion as planned via the T-bills it auctioned off on Tuesday as the offer attracted P41.78 billion in bids, making it almost 2.8 times oversubscribed.

Broken down, the BTr borrowed P5 billion as planned via the 91-day T-bills from P13.08 billion in tenders. The three-month debt paper fetched an average rate of 1.13%, 1.1 bps higher than the 1.119% quoted in the previous auction.

It also raised the programmed P5 billion from the 182-day T-bills as the tenor attracted bids worth P14.94 billion. The average yield on the six-month debt stood at 1.395%, up 0.8 bp from 1.387%.

Lastly, the Treasury made a full P5-billion award of the 364-day securities as demand reached P13.76 billion. The one-year paper fetched an average rate of 1.613%, up by 0.7 bp from 1.606% previously.

Meanwhile, the last time the BTr auctioned off the reissued 10-year bonds on offer on Tuesday was Sept. 28, when it made a full P35-billion award from P73.59 billion in tenders.

The 10-year note fetched an average rate of 4.689% at that auction, higher than the 4.246% recorded in the previous offering and its 4% coupon rate.

The BTr plans to raise P200 billion from the domestic market in November, or P60 billion via weekly offers of T-bills and P140 billion from weekly T-bond auctions.

The government wants to borrow P3 trillion from local and external sources this year to help fund a budget deficit seen to hit 9.3% of the country’s gross domestic product. — Jenina P. Ibanez

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