Rates of T-bills, bonds to move sideways as virus fears persist

MARA RIVERA/UNSPLASH

GOVERNMENT SECURITIES on offer this week may see their yields move sideways at the first auctions of the Bureau of the Treasury (BTr) this year.

The BTr will offer P20 billion in Treasury bills (T-bills) on Monday: P5 billion each in 91- and 182-day debt papers and P10 billion in 364-day securities.

On Tuesday, it is looking to borrow P30 billion via an offer of reissued 10-year Treasury bonds (T-bonds). The notes have a remaining life of four years and eight months and carry a coupon of 3.625%.

A bond trader said via Viber over the weekend that the yields of the T-bills on offer on Monday could move sideways or slightly lower, while the five-year bonds could fetch rates between 2.5% and 2.575% “as the tenor remains attractive for yield pickup.”

The trader said the movement of rates of government securities will be supported by expectations on the upcoming inflation data for December. The Philippine Statistics Authority is set to report December and full-year 2020 inflation data on Tuesday, Jan. 5.

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Headline inflation likely rose by 2.9-3.7% last month on higher prices of oil and agricultural products, according to the central bank’s estimate.

Inflation picked up by 3.3% in November, taking the year-to-date print to 2.5%, within the Bangko Sentral ng Pilipinas’ full-year target of 2-4%.

Meanwhile, rates of local government securities (GS) are expected to ease further at the start of the year, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, similar to the continued decline in bond yields in most parts of the world due to fears that the new coronavirus strain will hamper economic recovery.

“GS yields, especially short-term tenors, could also ease, upon crossing the new year, after the end of window-dressing/balance sheet management after the end of the accounting year, thereby also resulting to less premium of time deposit and other high-cost funds,” Mr. Ricafort said via Viber over the weekend.

The BTr, at its previous auction on Dec. 14, made a full P20-billion award of the T-bills it offered as total tenders reached P76 billion.

Broken down, it borrowed P5 billion as planned via the three-month papers at an average rate of 1.022%, up by 0.7 basis point (bp) from the 1.015% fetched in the Dec. 7 auction.

It raised another P5 billion as planned in six-month T-bills at an average rate of 1.4%, up from 1.399% previously.

The government also borrowed P10 billion in one-year securities as the average rate went down to 1.686% from the 1.695% in the previous auction.

Meanwhile, the last time Treasury offered the 10-year notes was in November, where the papers fetched an average rate of 2.9%, up by 11.9 bps from the 2.782% quoted in the Oct. 20 auction. This 10-year bond series was first issued in September 2015 and are set to mature in September 2025.

The BTr plans to borrow P140 billion from the local debt market this month: P80 billion via weekly auctions of T-bills and P60 billion from fortnightly T-bond offerings.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga

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