Rates of Treasury bills, bonds expected to move sideways

THE RATES of government securities on offer this week will likely move sideways as US Treasury yields continue to ease.

The Bureau of the Treasury (BTr) is looking to raise P25 billion via its offer of Treasury bills (T-bills) on Monday, broken down into P5 billion in 91-day debt, P8 billion in 182-day papers and P12 billion in 364-day securities.

On Tuesday, the BTr will offer P35 billion in fresh seven-year Treasury bonds (T-bonds).

Two bond traders said the yields of the T-bills will move sideways with a slight upward bias at Monday’s auction.

Meanwhile, the first trader expects the seven-year bonds to fetch a coupon rate of between 3.625% and 3.875%, while the second trader gave a higher forecast range of 3.75-4%.

“For the factors to consider, the market is looking at the movement of the US Treasury so they take directions from there. On the T-bills, there is still strong demand while the seven-year bonds could be oversubscribed by two times,” the first trader said by phone on Friday.

The second trader said the market will “continue to demand higher yield for longer tenors.”

The rate of the benchmark 10-year US Treasuries went down by 8 basis points (bps) to 1.59% on Friday from 1.67% the week before.

The BTr made a full P25-billion award of the T-bills it auctioned off last week even as the rates of some tenors went up. Total tenders reached P54.74 billion.

Broken down, the Treasury raised P5 billion as planned via the 91-day debt from P11.032 billion in bids. The three-month papers fetched an average rate of 1.325%, up from the 1.295% seen during the April 5 auction.

The BTr also borrowed the programmed P8 billion from the 182-day T-bills. The average rate of the six-month papers rose to 1.695% from 1.646% previously.

Lastly, the government made a full P12-billion award of the 364-day debt at an average yield of 1.903%, down from the previous week’s rate of 1.912%.

Meanwhile, the last time the Treasury offered the seven-year tenor was on Jan. 21, 2020, when it awarded P27.203 billion in reissued papers out of the P30-billion program. The bonds were quoted at an average rate of 4.322%.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills were quoted at 1.3804%, 1.6197%, and 1.8961%, respectively, while the seven-year bond fetched a rate of 3.7233%, based on the  PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The government wants to raise P170 billion from the local debt market this month: P100 billion via weekly offers of T-bills and P70 billion from fortnightly auctions of T-bonds. It is looking to borrow P3 trillion this year from domestic and external sources to help fund a budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga