RATES of the government securities (GS) to be offered this week may rise following the Bangko Sentral ng Pilipinas’ (BSP) hawkish policy signals and expectations of higher bond supply, analysts said.
On Tuesday, the Bureau of the Treasury (BTr) will auction off up to P80 billion in short-term securities.
Broken down, it will offer P10-20 billion in 35-day cash management bills (CMBs).
It will also auction off up to P60 billion in Treasury bills (T-bills). Specifically, the Treasury is looking to raise P20-25 billion from 91-day papers, P15-20 billion via 182-day securities, and P7-15 billion through 364-day debt.
On Wednesday, the government will seek to raise P30 billion from reissued 20-year Treasury bonds (T-bonds) with a remaining life of four years and 10 months.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill yields could again correct slightly higher this week to track secondary market movements after the BSP’s latest hike and tightening signals.
“Yields on GS rose by around 2-3 basis points (bps) post-Monetary Board (MB) meeting. Trading was mostly two-way, with bids coming from investment books,” a trader said.
At its Aug. 27 meeting, the central bank delivered its third straight rate hike in a preemptive move to guard against inflation pressures from volatile global oil prices, the looming “Super El Niño,” and potential minimum wage increases.
The Monetary Board raised its benchmark rate by 25 bps to an over one-year high of 5%, with BSP Governor Eli M. Remolona, Jr. signaling more hikes as needed to steer inflation back to their 3% target.
This brought cumulative increases since April to 75 bps.
In the seven months to July, headline inflation averaged 5%. The BSP sees the consumer price index averaging 6.1% this year, well above its 2%-4% tolerance band.
The Monetary Board’s last two policy reviews this year are scheduled for Oct. 22 and Dec. 17.
For the reissued 20-year bond, rates could likewise be close to comparable secondary market yields, Mr. Ricafort said. Elevated oil prices and hawkish signals from the US Federal Reserve could also put upward pressure on local yields, he added.
The trader said the bonds on offer on Wednesday could fetch yields from 7.05%-7.1%.
“It would be interesting to see how the five-year bond auction pans out given the hawkish tone of the MB and looming jumbo supply.”
At the secondary market on Friday, yields on the 35-, 91-, 182- and 364-day bills went up by 12.09 bps, 9.09 bps, 16.6 bps, and 4.24 bps week on week to 4.8853%, 5.0934%, 5.4872%, and 5.7017%, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System website.
For its part, the 20-year bond went down by 17.73 bps week on week to end at 7.3277%, while the five-year debt, the tenor closest to the remaining life of the series on offer on Wednesday, inched down by 0.68 bp to close at 7.0658%.
Last week, the Treasury borrowed only P7.665 billion via the 35-day CMBs, below the P20-billion program, despite demand reaching P22.966 billion. The one-month bill fetched an average rate of 4.823%, up by 0.7 bp from the 4.816% quoted on July 20 when they were last offered. Bid yields were from 4.775% to 4.89%.
Meanwhile, for the 91-day T-bills, the Treasury borrowed P20 billion as bids for the tenor reached P35.798 billion. The three-month paper fetched an average rate of 5.051%, up by 4.3 bps week on week. Tenders accepted had yields from 4.96% to 5.104%.
The government also raised P15 billion via the 182-day papers as tenders hit P42.232 billion. The average yield on the six-month T-bill inched down by 0.9 bp to 5.433%. Bid rates awarded were from 5.399% to 5.4673%.
Lastly, the BTr sold P15 billion in 364-day securities as demand for the tenor totaled P21.455 billion. The one-year paper fetched an average rate of 5.64%, climbing by 2.7 bps week on week. Accepted yields ranged from 5.6% to 5.682%.
Meanwhile, the reissued 20-year T-bonds to be offered on Wednesday were last auctioned off on Aug. 4, where the government raised a total of P40 billion, or P30 billion via the regular auction and P10 billion from a tap facility offering. The papers fetched an average yield of 7.139%, below the 8% coupon.
For September, the government is aiming to raise up to P380 billion from the domestic market, excluding potential CMB issuances. This consists of P250 billion in T-bills and P130 billion in T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.659 trillion or 5.4% of gross domestic product this year. — Justine Irish D. Tabile
