Rates of Treasury bills, bonds to climb

BW FILE PHOTO

RATE of public securities on offer this week are expected to climb further as a title inflation likely hit a nearly four-year high in June, which could lead the Bangko Sentral ng Pilipinas (BSP) to raise borrowing costs more aggressively.

The Bureau of the Treasury (BTr) will offer 15 billion pesos in treasury bills (treasury bills) on Monday, or 5 billion pesos each in 91-, 182- and 364-day debt securities.

On Tuesday, the BTr will auction off 35 billion pesos in seven-year Treasury bonds (T-bonds) with a remaining life of three years and seven months.

Traders said government debt rates on offer this week are likely to rise as June’s consumer price index (CPI) is expected to hit a new high.

“An upside bias is still expected, especially with CPI data due on Tuesday, and most expect it to reach or even break 6%,” said the Ifsaid the first trader.

The IfThe first trader said Treasury bill rates could rise 10 basis points (bps), while the reissued seven-year bond could hit yields between 5.625% and 6%.

Meanwhile, the second trader said that treasury bills on offer this week could reach rates 5 to 10 basis points higher than those seen at the previous auction, while the seven-year bond could attract yields ranging from 5.6% to 5.9%.

“Market participants will continue to demand relatively higher yields compared to benchmark yields in the secondary market to account for a possible upside inflation that could make BSP more hawkish than originally expected,” the second trader said.

The trader added that the two offers could attract “strong” demand, as three-year paper worth 103.6 billion pesos maturing this week will free up liquidity.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also expects government debt on offer this week to trade in yields as the market priced in further BSP tightening.

“A weaker peso exchange rate could lead to higher import costs and headline inflation, which in part [justifying] local policy rate hikes in the future,” Ricafort said in a Viber message.

The Philippine Statistics Authority will release its June Consumer Price Index report on Tuesday, July 5.

A Business world poll of 16 analysts last week gave a median estimate of 6% for June inflation, within the 5.7-6.5% forecast by the BSP last week.

If achieved, it would be well above BSP’s 2-4% target and 5% forecast for the year.

In May, title inflation was 5.4%, fueled by rising food and transport prices.

BSP Governor Felipe M. Medalla said last week that the central bank may consider a more aggressive rate hike at its Aug. 18 meeting if inflation maintains its upward momentum, but noted that the decision would remain dependent on the data.

In early June, ahead of the U.S. Federal Reserve’s decision to raise its own rates by 75 basis points at its own meeting that month, Medalla said he did not want to raise borrowing costs by more than 25 basis points per meeting.

On June 23, the BSP raised benchmark interest rates by 25 basis points for a second straight meeting to cool rising prices.

In the secondary market on Friday, 91-day, 182-day and 364-day Treasury bills were quoted at 1.7829%, 2.2109% and 2.6057%, respectively, based on PHP Bloomberg valuation benchmark rates. published on the Philippine Dealing System’s. website.

Meanwhile, the seven-year bond reached a yield of 5.5754%, while the four-year, the benchmark closest to the remaining life of the bonds to be offered on Tuesday, was quoted at 5.5754%.

Last week, the BTr raised just P13.95 billion from its offer of treasury bills, even though total offers reached 27.176 billion pesos, almost double the 15 billion pesosffuh.

Broken down, the Treasury raised 5 billion pesos as programmed from its offer of 91-day securities while the duration attracted 14.93 billion pesos in bids. The average tenor rate climbed 9.6 basis points to 1.855 from 1.759% in the previous auction. Accepted rates ranged from 1.8% to 1.91%.

The BTr also awarded all of the 5 billion pesos of the 364-day debt securities, with the total tenders reaching 6.75 billion pesos. The average rate for the one-year term climbed 17.6 basis points to 2.63% from the 2.454% previously seen, with the government accepting offers ranging from 2.45% to 2.874%.

Meanwhile, the government partially granted its 182-day debt offering, raising only 3.95 billion pesos against the 5 billion peso program, even as offers reached 5.5 billion pesos. . The average rate for the six-month term jumped 26.8 basis points to 2.4% from 2.132%, with yields on assigned bids in the 2.23-2.5% range.

On the other hand, the seven-year reissue papers that will be offered on Tuesday were last auctioned on January 21, 2020, where the BTr awarded a partial allocation of 27.203 billion pesos compared to the 30 billion program. pesos. During this auction, the tenor obtained an average rate of 4.732%.

The Treasury wants to raise 200 billion pesos domestically in July, or 60 billion pesos through treasury bills and 140 billion pesos through treasury bonds.

The government is borrowing from local and external sources to help finance a budget deficit capped at 7.6% of gross domestic product this year. — Diego Gabriel C.Robles

Garland K. Long