Rates of T-bills, bonds to climb

RATES of government securities on offer this week will likely climb anew amid weak demand as investors await possible policy tightening moves from the local and US central banks.

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

The government will also auction off P15 billion in reissued seven-year Treasury bonds (Tbond) with a remaining life of six years and five months tomorrow .

Bond traders interviewed before the weekend said the T-bills on offer today will likely fetch higher yields from last week’s auction.

“For the [T-]bills, the rates will climb by around 10-20 basis points (bps) still on weak demand across-the-board,” the trader said in a phone interview.

The Treasury opted for a partial award of the T-bills last week, borrowing P7 billion out of the P15-billion program as it rejected all bids for the 91-day tenor due to higher returns wanted by investors.

Yields on the 182- and 364day papers stood at 5.6072% and 6.256%, respectively.

For the seven-year bonds, the trader said it may fetch an average rate of 8-8.25%.

The government made a partial award of the reissued sevenyear debt on Sept. 25, borrowing just P5.73 billion versus the P15billion program.

The bonds, which carry a 5.75% coupon, fetched an average rate of 7.085%, up 110.9 bps from the 5.976% recorded on June 13.

At the secondary market on Friday, the three-month and six-month papers were quoted at 4.8339% and 5.6072%, respectively.

Meanwhile, the one-year and seven-year papers fetched 6.2589% and 7.9342%, respectively.

“Still, investors are awaiting the possible rate hike of the BSP (Bangko Sentral ng Pilipinas) as well as in the US,” the trader added.

Monetary Board (MB) Member Felipe M. Medalla said on Tuesday that the central bank “may take a pause” from further rate hikes should inflation momentum show signs of easing. However, he did not discount the possibility that commodity prices could still pick up faster.

The BSP also said on Friday that the pace of price increases could “revert more quickly” below 4% given the monetary policy tightening of the central bank as well as the measures implemented by the Executive.

The central bank has raised rates by a total of 150 bps since May as inflation maintained its ascent since the start of the year brought by surging oil prices and food supply issues exacerbated by the new taxes.

Meanwhile, the US Federal Reserve indicated in its September meeting minutes that it would stay on the course of gradual rate hikes

amid “sustained economic expansion, strong labor market conditions and inflation near two percent over the medium term.”

Another trader said the expected rate hikes from the Fed may temper the improvement in bids, although it will be “negated by the recent statements from MB members.”

“I think bids will somewhat improve given the better [consumer price index] expectations for last quarter,” the second trader said in a text message on Friday, noting that he cannot provide any range for the average rate of the Tbonds on offer “given the unpredictability of the BTr.”

“One day, they say their cash position is good, then suddenly awards bonds 20-40 bps higher than the previous auction,” the trader added.

The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in T-bonds.