RATES OF GOVERNMENT securities on offer this week could rise after the Bangko Sentral ng Pilipinas (BSP) delivered a jumbo increase on Thursday.
The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Monday, made up of P5 billion each in 91-, 182-, and 364-day debt papers.
On Tuesday, the BTr will also offer P35 billion in fresh 20-year Treasury bonds (T-bonds).
A trader said the T-bills and T-bonds on offer this week could fetch higher yields.
“For T-bills, we expect them to fetch yields most likely higher by 5 basis points (bps). For the 20-year bond, we expect yields to range between 8% and 8.25%,” the trader said in a phone call.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message that rates of government securities on offer this week could go up following the BSP’s latest tightening move.
Mr. Ricafort said in a text message that T-bill and T-bond yields at the secondary market were mostly slightly higher after the widely expected local policy rate hike and some seasonal window-dressing activities.
Analysts from UnionBank Economics Research said in a market report that investors also remain cautious about hawkish signals by the US Federal Reserve.
The Philippine central bank on Thursday fired off a big rate hike to match the Fed’s latest move and tame inflation.
The BSP raised its key interest rate by 75 bps to 5%, the highest in nearly 14 years. The rates on the central bank’s overnight deposit and lending facilities were also increased to 4.5% and 5.5%, respectively.
The central bank has raised rates by a total of 300 bps so far this year. Its last meeting for the year is scheduled on Dec. 15.
Headline inflation in October accelerated 7.7%, its fastest pace in nearly 14 years, mainly driven by rising food costs. For the first 10 months, inflation averaged 5.4%, well above the BSP’s 2-4% target.
At its meeting last week, the BSP also raised its average inflation forecast for this year to 5.8%, from 5.4%. For next year, inflation is now seen averaging 4.3%, up from 4.1% previously.
Meanwhile, eyes are on the Fed as investors await clarity on their next move, with the market expecting a less aggressive 50-bp hike at their Dec. 13-14 meeting following four consecutive 75-bp increases.
The US central bank has raised rates by 375 bps since March.
At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 4.1205%, 4.8101%, and 5.0535%, respectively, based on the PHP BVAL Reference Rates published on the Philippine Dealing System’s website. Meanwhile, the 20-year paper fetched a yield of 7.897%.
Last week, the government partially awarded the T-bills it auctioned off even as bids reached P24.047 billion, higher than the P15-billion offer.
Broken down, the Treasury borrowed P5 billion as planned via the 91-day securities, with bids reaching P13.7 billion. The average rate of the tenor rose by 11.4 basis points (bps) to 4.464% from the 4.35% fetched previously, with the government accepting offers with yields from 4.35% to 4.54%.
Meanwhile, the government awarded just P2.2 billion in 182-day T-bills, even as tenders for the tenor hit P7.147 billion, above the P5-billion program. The six-month paper fetched an average rate of 4.838%, up by 3.8 bps from the 4.8% quoted for the previous award, with accepted rates ranging from 4.825% to 4.85%.
Lastly, the BTr borrowed only P1.4 billion via the 364-day debt papers, with demand reaching just P3.2 billion versus the P5 billion on the auction block. The average rate of the one-year paper climbed by 10 bps to 5.1% from 5% the prior week, with the Treasury only accepting bids with a yield of 5.1%.
The Treasury plans to raise P215 billion from the domestic market in November, or P140 billion through T-bills and P75 billion from T-bonds.
The government borrows from local and external sources to help plug a budget deficit capped at 7.6% of gross domestic product this year. — Luisa Maria Jacinta C. Jocson