Shorter tenors to fetch lower rates at auctions

SHORTER-DATED government securities on offer this week are seen to fetch lower yields as investors track the movement of US Treasuries while waiting for the next move of the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury ( BTr) is offering P15 billion worth of Treasury bills (T-bills) today. Broken down, the Treasury plans to raise P5 billion and P4 billion through the three- and six- month papers, respectively, and another P6 billion in oneyear T-bills.

The government will also offer P10 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 10 months.

A trader said in an interview on Friday that yields on the Tbills are seen to move sideways or lower as market appetite is still on the short-dated tenors.

“The 91- and 182- day [ bills] might be lower by five basis points [ from the previous auction],” a trader said over the phone, noting there is “strong demand on the shorter-dated papers.”

The rate of the 364-day papers, meanwhile, is seen to move sideways due to tepid demand.

“The one-year T- bills might be awarded partially,” the trader added.

Last Tuesday, the government borrowed P11.236 billion via Tbills out of the P15 billion it offered as investors sought higher returns for the one-year tenor. Full awards were made for the 91and 182-day T-bills worth P5 billion and P4 billion respectively, fetching average rates of 3.451% and 3.934%.

However, demand was low for the 364- day papers as tenders only reached P3.146 billion versus the P6 billion programmed by the government. The BTr only accepted P2.236 billion from investors, capping bids at 4.35%. The one-year paper was quoted an average yield of 4.226%, higher than the 3.986% seen a week earlier.

At the secondary market on Friday, the 91- day T- bills were quoted at 3.4549%, while the 182-day papers fetched 3.914%. The rate of the 364-day securities closed at 4.1601%.

Meanwhile, the traders expect the rate of the 10-year bonds to likewise move sideways.

THE MAIN INDEX may continue to trade in a tight range this week as investors look at whether companies can sustain their growth momentum in the first quarter for the rest of the year.

The Philippine Stock Exchange index ( PSEi) dipped 0.28% or 21.84 points to 7,672.28 last Friday due to rising inflation woes alongside higher Treasury yields in the United States.

The market was down for most of the week except on Tuesday, when it saw extended optimism from investors after the Bangko Sentral ng Pilipinas raised interest rates by 25 basis points.

On a weekly basis, the index fell 1.03% or 79.83 points, weighed down by a 3% drop in holding firms and 2% decline in industrials. The property sector was the lone sub-index that ended in the green for the week, which analysts attributed to the growth of real estate developers for the first quarter.

“( S) everal companies posted tremendous growth in the first quarter. We continue to be bullish on property stocks as the real estate sector proves to be very strong in terms of sales,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report, noting that Megaworld Corp. and SM Prime Holdings, Inc. were among the top gainers for the week.

Meanwhile, net foreign selling stood at P550 million on average for the week.

“As we go into the new trading week, based on the market sentiment, the index will continue to trade within this congestion area between the strong support at 7,500 and the resistance at 7,830,” Mr. Mangun said.

Online brokerage 2TradeAsia. com said investors will be looking at whether index stocks will be able to sustain their double-digit growth last quarter.

“Greater weight has been placed on listed firms’ ability to weather out inflation, given the latest volatility in oil prices, provisions for the second phase of tax reform plan, and forex volatility, among others,” 2TradeAsia.com said in a weekly market note.

The company noted geopolitical tensions may also weigh on investor sentiment for the week.

US President Donald J. Trump recently announced the country’s withdrawal from its nuclear agreement with Iran, which was made together with Europe in 2015.

“The uncertain outcome of whether the US government would enter into a revise deal with Iran, will likely create increased volatility for commodities, as higher fuel prices will be weighed relative to real returns,” 2TradeAsia.com said.

Eagle Equities’ Mr. Mangun placed the index’s likely support at 7,500 to 7,625 and resistance from 7,830 to 7,900.

“If we see a pickup in volume, the index may break above resistance and try for the next one at 8,000. A break of 8,000 will confirm a trend reversal which will bring investors back into this market,” Mr. Mangun said. •