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T-bill, bond rates may inch up

THE RATES of Treasury bills and bonds on offer this week may end flat or inch higher amid improved economic prospects.

The Bureau of the Treasury (BTr) will borrow P20 billion via Treasury bills (T-bills) on Tuesday: P5 billion each in 91-day and 182-day papers and P10 billion in 364-day securities.

On Wednesday, the government will auction off P30 billion in reissued three-year Treasury bonds (T-bonds), which have a remaining life of two years and nine months.

A trader said the rates of T-bills may remain unchanged as investors weigh potential risks to inflation even as they remain liquid and prefer short-term debt.

“Oversubscription to shorter tenors and their lower yields have shown strong liquidity among investors. However, a possible uptick in inflation may slightly increase T-bill rates,” the trader said in an e-mail.

The trader said a pickup in economic activity as more businesses reopen could stoke inflation.

Another trader said T-bond yields could increase as investors anticipate improved business activity and progress on vaccine candidates against the coronavirus disease 2019 (COVID-19).

“Investors will seek higher returns as they expect the economy to further recover with increased business activity and developments in COVID-19 vaccines and amid competition with other investment options,” the second trader said in an e-mail.

The government made a full award of T-bills it offered last week as yields declined across the board on the back of ample liquidity among investors and the central bank’s surprise rate cut.

The BTr borrowed P20 billion as planned via the T-bills as the offer was almost four times oversubscribed, with bids amounting to P73.42 billion.

Broken down, the BTr borrowed the programmed P5 billion through the 91-day T-bills as tenders reached P18.85 billion. The three-month debt’s average rate fell below one percent and fetched 0.986%, down by 3.3 basis points (bps) from the 1.019% seen in the previous auction.

The Treasury also awarded another P5 billion as planned in 182-day debt as bids amounted to P20.8 billion. The six-month papers were quoted at an average rate of 1.385%, declining by 5.8 bps from the 1.443% logged in the previous week’s offering.

Lastly, the government made a full P10-billion award of the 364-day securities as tenders totaled P33.77 billion. The average rate of the one-year securities was at 1.695%, lower by 5 bps from the 1.745% seen during the previous auction.

The BTr also opened its tap facility to raise another P5 billion in one-year papers to take advantage of the strong demand and lower rates.

Meanwhile, the government made a full P30-billion award of the reissued three-year bonds when they were last offered on Nov. 4. The papers, which have a coupon of 2.375%, fetched an average rate of 2.224%, higher than the 2.182% logged in the previous auction.

At the secondary market on Friday, the three-month, six-month and one-year T-bills were quoted at 1.131%, 1.428% and 1.704%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website. Meanwhile, the three-year T-bonds fetched a yield of 2.19%.

Inflation likely settled between 2.4% and 3.2% in November on higher oil prices and crop damage caused by typhoons, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno on Friday.

Inflation quickened to 2.5% in October from 2.3% in September, the fastest pace in three months.

The uptick was mainly due to faster increases in prices of food and nonalcoholic beverages, as well as in education, restaurant and miscellaneous goods and services.

Inflation has averaged at 2.5% to date, within the BSP’s 2-4% target.

The Philippine Statistics Authority will report November inflation data on Dec. 4.

In its latest meeting, the BSP upgraded its inflation forecast for this year to 2.4% from the 2.3% it gave in the October review.

The inflation outlook for 2021 and 2022 were, meanwhile, lowered to 2.7% (from 2.8%) and 2.9% (from 3%), respectively, due to the slower-than-expected pickup in domestic activity, the decline in global crude oil prices, and the strengthening of the peso.

Philippine gross domestic product contracted by 11.5% in the third quarter, better than the record 16.9% decline posted in the previous quarter.

Year to date, the economy shrank by 10%.

The Treasury plans to borrow P120 billion from domestic lenders in December: P60 billion in weekly T-bill auctions and P60 billion in fortnightly T-bond offerings.

It is also offering another tranche of Premyo bonds to raise at least P3 billion. The offer period is set to run from Nov. 11 to Dec. 18.

The government wants to raise around P3 trillion this year from local and foreign lenders to help fund its budget deficit, which is expected to hit 9.6% of the country’s gross domestic product.

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