RATES OF the government securities (GS) on offer this week will likely move sideways on ample demand amid strong market liquidity and as inflation eased in August.
The Bureau of the Treasury (BTr) is set to borrow P20 billion from Treasury bills (T-bills) on Monday: P5 billion each from 91- and 182-day debt papers and P10 billion via the 364-day securities. On Tuesday, the government will also offer P30 billion worth of fresh three-year Treasury bonds (T-bonds).
A trader said yields on the T-bills could move sideways or end flat as the market remains awash with cash.
“T-bill yields could just move sideways or just flat from the previous auction. Bulk of the investor demand is still concentrated on the short to the belly of the GS curve with liquidity still robust,” the trader said in a Viber message.
Another trader expects the T-bill rates to remain steady or go down slightly from the yields fetched in the previous offering on positive August inflation data.
“Rates on T-bills might be unchanged or down by five basis points (bps)… given the better-than-expected inflation report,” the second trader said.
Inflation eased to a three-month low in August amid improved supply as the economy reopened from another two-week strict lockdown meant to contain a coronavirus pandemic, the Philippine Statistics Authority reported on Friday.
Prices of widely used goods rose by 2.4% last month, bringing the eight-month average to 2.5%. The August print was slower than the 2.7% logged in July but faster than the 1.7% seen in August 2019.
The Treasury last week made a full award of its P20-billion offer of T-bills even as rates rose across-the-board, with tenders reaching P55.736 billion.
The Treasury awarded P5 billion in 91-day securities as programmed out of bids worth P15.213 billion at an average yield of 1.18%, up 4.9 bps from the previous auction.
The government also borrowed P5 billion as planned via the 182-day T-bills as total tenders reached P15.263 billion. The papers were quoted at 1.421%, up by 1.4 bps.
The BTr also made a full P10-billion award of the 364-day papers out of P25.260 billion in bids. The one-year T-bills fetched an average rate of 1.788%, higher by 3.7 bps.
Meanwhile, for the three-year T-bonds, the first trader said ample liquidity might cause the tenor to fetch a yield above 2%.
“For the new three-year bonds, it is expected to fetch a coupon rate within 2.25% to 2.5%,” the trader said.
The second trader said the rate of the bonds will likely move sideways within the same range or edge lower following the August inflation print.
“The three-year bond was a good choice since there is no real three-year benchmark now. There are also investors who are looking for higher yields but cannot extend longer than three years,” the second trader noted.
The Treasury last offered the three-year tenor in January where it partially awarded the reissued three-year T-bonds as rates climbed.
The BTr raised just P16.586 billion via the three-year T-bonds on Jan. 7, failing to fill the P30-billion program even as the tenor attracted bids worth P37.35 billion, as the average rate for the three-year papers jumped 27.2 bps to 4.014%.
At the secondary market on Friday, rates of the three-month, six-month and one-year T-bills stood at 1.209%, 1.461% and 1.807%, respectively. Meanwhile, the three-year T-bonds fetched a yield of 2.354%.
The Treasury is looking to raise P160 billion from the domestic market this month: P100 billion via weekly auctions of T-bills and P60 billion via T-bonds to be offered fortnightly.
The government is looking to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — K.K.T. Jose