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Treasury bills, bond rates may move sideways

RATES OF government securities on offer this week will likely move sideways for the short-term papers and end lower for the longer tenors ahead of the Monetary Board’s last policy meeting for the year.

The Bureau of the Treasury (BTr) is set to offer P20 billion in Treasury bills (T-bills) on Monday: P5 billion each via the 91- and 182-day debt papers and P10 billion in one-year instruments.

On Tuesday, the BTr will borrow P30 billion via the reissued 10-year notes with a remaining life of six years and four months. The debt papers carry a coupon of 4.75%.

This week’s offerings will be the government’s last two auctions for the year.

The Treasury is also set to issue on Wednesday fresh one-year Premyo bonds as the offer period closed last week. National Treasurer Rosalia V. de Leon said in a Viber message that they will announce on Friday, Dec. 18, the amount raised from the Premyo bonds.

Yields on the T-bills on offer today will likely inch up from the rates seen in last week’s auction, while the 10-year debt papers could be quoted at a lower rate, Noel S. Reyes, first vice-president and chief investment officer of the Asset Management Group at Security Bank Corp., said in an e-mail on Friday.

“The bias would be slightly flat to slightly higher on the T-bill auction given that the curve is very steep, with the long-end wallowing at the highs pre-Monetary Board meeting and a reversal [with] short-term bond yields climbing higher while long-term bond yields coming lower may be likely before the Christmas spirit takes its toll on trading activity,” Mr. Reyes said.

The Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board will hold its last review for the year on Thursday, Dec. 17.

The central bank is likely to retain key policy rates at its current record low levels, taking into account faster inflation and to allow previous measures to be absorbed by the financial system, analysts said.

A BusinessWorld poll held last week found 15 analysts of the view that the Monetary Board will keep rates steady at its seventh and final policy meeting for the year.

However, with recovery prospects looking grim, many analysts believe the BSP will resume its easing cycle as early as the first quarter of 2021 to provide support to the economy.

The BSP last month slashed benchmark rates by 25 basis points (bps) to fresh record lows, bringing its cumulative cuts for the year to 200 bps.

Government bond yields “will still likely remain floored,” said Nicholas Antonio T. Mapa, ING Bank N.V. Manila senior economist, as the financial system remains awash with cash and with investors still opting to park their excess funds in the safer assets as the economic outlook remains uncertain.

“BTr appears to be winding down its borrowings and this moves in line by recent comments suggesting authorities will be cutting back on spending to limit the hit on fiscal debt metrics. Given the dearth of options and general uncertainty given the prognosis for a couple more quarters of recession, the local GS market remains the only game in town,” Mr. Mapa said via e-mail on Friday.

At the secondary market on Friday, the three-month, six-month and one-year T-bills were quoted at 1.118%, 1.44% and 1.737%, respectively, while the 10-year bonds fetched a rate of 3.008%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The Treasury last week made a full P20-billion award of the T-bills it offered from bids worth P74.79 billion.

Broken down, it borrowed the programmed P5 billion via the 91-day debt papers from P17.11 billion in tenders. The average rate of the three-month debt inched up by 0.9 bp to 1.015% from the 1.006% seen at the Dec. 1 auction.

The government also raised P5 billion as planned from the 182-day T-bills out of tenders worth P15.583 billion. The six-month securities fetched an average rate of 1.399%, up 1.3 bps from 1.386% previously.

For the 363-day securities, the Treasury made a full award of its P10-billion offering as demand hit P42.097 billion. The one-year T-bills fetched an average rate of 1.695%, inching up by 0.2 bp from the 1.693% seen in the previous offering.

Meanwhile, the 10-year T-bonds on offer on Tuesday were last reissued on Nov. 9, 2017 at an average rate of 4.915%.

The Treasury’s most recent offering of the tenor was  on Nov. 18, when the BTr made a full P30-billion award out of tenders worth P65.997 billion. The debt papers, which have a remaining life of four years and eight months, fetched an average rate of 2.9%, up 11.9 bps from the 2.782% seen at the Oct. 20 auction.

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

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 7.6% of the country’s gross domestic product. — B.M. Laforga

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