Yields on T-bills, bonds to go up

YIELDS ON Treasury bills (Tbill) and Treasury bonds (Tbond) to be auctioned off this week are likely to move sideways or slightly higher, with bids to continue stabilizing as the market expects better economic data to be released this week.

The Bureau of the Treasury (BTr) is offering P15 billion worth of T-bills at its auction today, of which P4 billion will be in 91-day debt papers, P5 billion in sixmonth securities, and P6 billion in the one-year tenor.

The government is also offering P15-billion worth of reissued 10-year T-bonds with a remaining life of nine years and four months on Tuesday. The notes carry a 6.25% coupon rate.

Traders interviewed last week said debt yields will likely move sideways or slightly higher as the market expects an easing in inflation and a more robust thirdquarter economic growth.

“Last week, we saw a good rally in bonds. Mainly because of improving CPI (consumer price index) outlook. So expect the positive momentum to somehow carry over this week,” a trader said in a text message.

“However, I see CPI data hours before bond auction will dictate the tone,” the trader added, while noting it would be “hard to gauge if there will be good demand for that given the recent US jobs report, which means the Fed rate hike is almost sure this coming December.”

Last week, the government made a full P15-billion award of the T-bills it offered, with yields remaining low on strong investor demand amid expectations of easing inflation. Total tenders stood at P26.985 billion, climbing from the P24.51 billion recorded at the previous offering.

Broken down, the government borrowed P4 billion as planned via the 91-day T-bills last week as bids amounted to P5.936 billion. The average rate rose just 2.7 basis points (bp) to 4.979% from the 4.952% logged in the previous auction.

The Treasury also made a full award of the 182-day papers, accepting P5 billion as planned out of offers totalling P7.534 billion. The average yield likewise rose 10 bps to 6.159% from 6.059%.

For the 364-day T-bills, the BTr borrowed the programmed P6 billion out of the P13.515 billion tendered by banks. Strong demand caused the average rate to slide 7.9 bps to 6.41% from the 6.489% tallied in the previous offering.

Another trader said by phone that the 10-year T-bond’s rate tomorrow “will likely move sideways, or if higher, it would be modest, as they await the inflation and GDP (gross domestic product) data, but the consensus is that the rise in prices may have plateaued and that the third quarter growth will likely accelerate from the previous quarter.”

A BusinessWorld poll of 15 economists bared a median inflation estimate of 6.7% for October, which if realized would be steady from September’s print —signalling that inflation may have already peaked.

The median also sits within the Bangko Sentral ng Pilipinas Department of Economic Research’s 6.2-7% forecast range.

A separate poll of the same economists showed a median forecast of 6.3% for the country’s thirdquarter economic growth, faster than the 6% recorded in the second quarter but slower than the 7% in the July-September period in 2017.

Moreover, the first trader said yields on the shorter-dated T-bills will continue to see higher rates, although at a moderate pace.

“The T-bills is possibly unchanged, or about 10 basis points higher, which was tamed compared to previous weeks,” the trader said.

At the secondary market last week, the three-month, sixmonth and one-year T-bills were quoted at 5.098%, 5.915% and 6.564%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website. Meanwhile, the 10-year T-bonds fetched 8.014%.

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. •