Demand for T-bills, bonds to ease

YIELDS ON government securities on offer this week will likely move sideways on weak demand as the market waits for the release of inflation data expected to show a further acceleration in price increases.

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

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

In an interview, a trader said rates on the T- bills on auction today are expected to “move sideways from the previous auction.”

Last Monday, the Treasury decided on a partial award of the P15-billion T-bills it offered, borrowing only P11.9 billion despite the P20.3 billion tendered by investors. Rates climbed across the tenors as the 91-, 182- and 364-day papers fetched yields of 3.484%, 3.873% and 4.429%, respectively.

Meanwhile, two traders said the 10- year bond auction on Tuesday could fetch higher yields, with the rate expected to land between 6.4% and 6.6%.

In May, the government borrowed just P4.1 billion via the reissued 10-year bonds out of the P10- billion program. That auction was met with demand amounting to P13.4 billion, with the average yield on the papers standing at 6.35%.

At the secondary market on Friday, the three- and six-month papers were quoted at 3.9071% and 3.8453%, respectively, while the one-year papers were at 4.4742%.

The 10-year bonds, meanwhile, fetched 6.4217% at the market’s close.

“[There might be] less demand as investors would rather wait for [inflation] data before considering longer tenors,” the second bond trader said in a mobile text message on Friday.

A poll among 12 economists yielded a median inflation forecast of 4.7% for the month of June. If realized, the inflation print will accelerate from May’s 4.6% figure to a fresh five-year high.

The 4.7% consensus falls in the middle of the Bangko Sentral ng Pilipinas’ 4.3-5.1% estimate given last Friday.

Analysts said inflation will accelerate a tad versus the previous month due to higher food and oil prices, although this was offset by easing electricity rates.