T-bills, T-bonds seen to fetch higher rates

GOVERNMENT SECURITIES on offer this will likely fetch higher yields ahead of the monetary policy meeting of the local central bank as well as April inflation data.

The Bureau of the Treasury (BTr) is offering today P15 billion worth of Treasury bills (T-bills) today, broken down into P5 billion and P4 billion in three- and sixmonth papers, respectively, and P6 billion in one-year debt notes.

On Wednesday, it will also offer P20 billion worth of reissued fiveyear Treasury bonds ( T- bonds) with a remaining life of four years and 10 months.

A trader interviewed on Friday said yields on the T-bills will likely move sideways or rise by five basis points.

“For the T-bills, probably the same as the previous [auctions], sideways to 5 basis points higher,” the trader said.

The trader added that yields on the T-bonds to be placed on the auction block on Wednesday might increase by five to 10 basis points higher from the previous auction.

Meanwhile, another trader sees Wednesday’s T-bonds being awarded at a rate between 5.5% and 5.75%.

During last week’s T- bills auction, rates of the 91- and 182day papers were at 3.597% and 3.889%, respectively, while the 364-day bills were awarded at a 3.986% rate.

Meanwhile, the government raised P12.039 billion out of the planned P20- billion borrowing from the fresh five-year bonds issued on March 6 with an average rate of 5.452%.

At the secondary market on Friday, the three- month, six- month and one- year papers fetched yields of 3.4941%, 3.8285% and 3.8565%, respectively, while the five-year bonds closed the week at 5.3543%.

The second trader said investors are still waiting for the monetary policy meeting of the Bangko Sentral ng Pilipinas (BSP) next month.

“[ The market is still] looking forward for the Monetary Board meeting for the month of May,” the bond trader said, adding that the market will be cautious as the auctions will be conducted prior to the announcement of the domestic inflation data.

“The auction will come before the official CPI (consumer price index) reading, so I think the market will be cautious that’s why we’re looking at higher rates,” the

trader added in a mix of Filipino and English.

According to a BusinessWorld poll of 11 economists, headline inflation likely accelerated in April to a 4.5% median forecast, which if realized will be higher than the 4.3% booked in March using 2012 as the base year.

“Any inflation reading higher than 4.3% would certainly increase the chances of a BSP action during its May 2018 meeting,” Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines said through e-mail.

Mr. Dumalagan added that the likely “uptick” in inflation for this month could bring to mind the recent comment of BSP Governor Nestor A. Espenilla, Jr. that an upward adjustment in policy rates is just a “question of timing.”

The BSP’s Monetary Board will meet for the third time this year on May 10.

Meanwhile, ANZ Research said in a report that “there is a need to see full awards in the auctions going forward” as the “under- funding via bonds auctions” as partial awards and rejections made by the Treasury in past auctions already amounted to P84 billion.

However, the P12 billion raised during the maiden sale of yuan-denominated panda bonds as well as the planned yen- denominated samurai bonds sale “could potentially reduce the funding need through bond auctions by some [P80 billion],” the firm added.

ANZ Research said the expected cut-off level for yields will be at the range of 5.55-5.7%.

The government seeks to raise P325 billion this quarter from local creditors through weekly auctions of securities.

It is holding two auctions per week — one for T- bills and another for T- bonds — compared to the previous one auction per week as it increased its borrowing requirements for the period.

It plans to borrow P888.23 billion from local and foreign sources this year to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. •