T-bills and bonds could hit higher rates as BTr adjusts its plan


RATES on government securities offered this week are likely to rise slightly ahead of the release of May inflation data and against a backdrop of rising bond supply, with the Treasury set to hold more auctions this month .

The Treasury Office (BTr) plans to raise 15 billion pesos on Monday via its offer of treasury bills (Treasury bills), broken down into 5 billion pesos in 91-day debt, 5 billion in 182-day pounds and 5 billion additional pesos. in securities at 364 days.

On Tuesday, the BTr will offer 35 billion pesos in 25-year reissued treasury bills (T-bonds) with a remaining term of 19 years and three months.

Traders said yields on government securities offered this week could rise as the Treasury’s borrowing program for June showed it plans to issue more debt, which could cause investors to adjust their positions. .

The government wants to raise P215 billion on the local debt market in June: Pesos 75 billion through weekly Treasury bill offers and Pesos 140 billion through weekly Treasury bond auctions.

That’s bigger than the 170 billion peso program for May, which was broken down into 100 billion pesos in treasury bills and 70 billion pesos in bonds. The government has adjusted the volume of weekly treasury bill offers to 15 billion pesos from 25 billion previously and has scheduled a weekly treasury bond auction instead of every fortnight.

ATRAM Trust Corp. fixed-income head Jose Miguel B. Liboro said government debt yields could rise as the Treasury is expected to hold four T-bond auctions in June, forcing investors to adjust their positions.

“BTr’s disclosure of next month’s borrowing plan signaled its desire to extend the maturity of its peso debt and relieve debt service pressures. It is best to issue long-term securities shortly before the Fed (US Federal Reserve) talks intensify, which is likely to generate upward pressure on US rates, ”said one trader .

“Long-term market apathy will persist amid a week of heavy data highlighted by May inflation. Our traders expect last week’s market preference for strong interest in the belly of the curve and below to persist for a long time starting with the [7-year] segment remains vulnerable to selling pressure, ”added the trader.

The trader noted that strong demand is expected Tuesday for the Treasury’s supply of 25-year reissued bonds “given the exhaustion of supply in the market.”

May inflation data that will be released this week will also affect market sentiment and could affect rates to recover at Monday and Tuesday auctions.

Inflation likely accelerated at the same pace for the third month in a row in May, as food prices fell while oil and utility costs put upward pressure, analysts said.

A Business world poll of 17 analysts last week gave a median estimate of 4.5% for headline inflation for May.

If achieved, it would mark the third consecutive month of steady inflation. However, this exceeds the BSP target of 2-4% and is faster than the 2.1% impression recorded in the same month last year.

The Philippine Statistics Authority will release official inflation data on Friday, June 4.

The government has fully granted the treasury bills it offered last week, with demand for safe assets remaining high amid plentiful liquidity in the market.

The BTr borrowed 25 billion pesos as planned via treasury bills, with total tenders reaching 75.844 billion pesos, making the offer more than three times oversubscribed.

Broken down, the government raised the 5 billion pesos programmed on the 91-day debt papers as bids for the tenor reached 16.965 billion pesos. Three-month Treasury bills reached an average rate of 1.269%, down 0.1 basis point (bps) from the 1.27% previously mentioned.

The Treasury also granted a full 8 billion peso allotment of the 182-day securities, as it received some 20.288 billion pesos in tenders. Six-month Treasuries hit an average rate of 1.541%, up from 1.54% seen in the previous auction.

Finally, the government granted 12 billion pesos as planned in 364-day treasury bills out of 38.595 billion pesos in tenders. The average yield on one-year papers slipped 1.4bp to 1.796% from the 1.81% quoted in the previous offering.

The Treasury opened its direct debit facility to raise an additional 5 billion pesos via the one-year tenor in order to meet the strong demand for papers.

Meanwhile, the BTr first issued the proposed 25-year bonds on Tuesday, September 9, 2015. The bonds carry a coupon of 4.625%.

The last time the government offered 20-year bonds – the grade closest to the remaining life of newspapers on the auction block on Tuesday – was in August 2020, where it rejected all bids because investors were looking for higher yields, pushing up paper rates.

In the secondary market on Friday, 91-, 182- and 364-day T-bills were listed at 1.3221%, 1.5543% and 1.8121%, respectively, based on the PHL Bloomberg valuation benchmark rates. published on the Philippine Dealing System’s. website.

Meanwhile, the 20-year T bond returned 4.9292% while the 25-year tenor was listed at 4.9298%.

The government plans to borrow P3 3 trillion from domestic and external sources this year to help finance a budget deficit that is expected to reach 8.9% of gross domestic product.

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