Treasuries and bonds are expected to reach higher rates

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RATE of public securities on offer this week are expected to climb further as investors expect the Bangko Sentral ng Pilipinas (BSP) to aggressively raise borrowing costs next month amid risingflation.

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

On Tuesday, the BTr will auction 35 billion pesos in 10-year Treasury bills (T-bonds) with a remaining life of six years and six months.

Traders said government debt yields on offer this week are expected to climb after BSP Governor Felipe M. Medalla said the central bank was ready to act aggressively amid growing risks to the infloutlook for action.

“Treasuries will likely climb even higher by 10 to 15 basis points (basis points) higher this week. The seven-year reissue will likely range from 6.75% to 7%. ‘a 50 basis point rate hike is already a possibility, so government bond yields will come under higher pressure, especially on the short end of the curve,’ said the Ifsaid the first trader.

The second trader also said yields will rise as the market anticipates a 50 basis point rise in BSP at its Aug. 18 meeting. The trader expects Treasury bill rates to rise 5 to 15 basis points and reissue bond yields to rise. vary from 6.7% to 7%.

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said yields on Treasuries to be auctioned on Monday could rise slightly and follow secondary market moves.

Mr. Ricafort said secondary market yields on Treasuries rose on hawkish signals from Mr. Medalla amid rising inflation and a falling peso against the dollar.

Medalla said last week that the BSP was ready to raise its key rate by 50 basis points at its August 18 meeting to rein in inflation after the peso broke through the P56 level against the dollar on Thursday to close to its record low.

He said the US central bank’s hawkish stance has put “strong depreciating pressures” on global currencies such as the peso, adding tofloperating risks.

The peso closed at 56.06 pesos against the dollar on Thursday, down 39 centavos or 0.7% from the previous day, according to data from the Philippine Bankers Association.

It’s the worst of the peso Ifnish since September 27, 2005 at P56.30 per dollar and only 39 centavos off the record low of P56.45 on October 14, 2004.

The Monetary Board has raised benchmark interest rates by a total of 50 basis points so far this year via 25 basis point hikes at its May 19 and June 23 meetings, bringing the rate manager at 2.5%.

Mr. Medalla said last week that the BSP could raise rates by at least 100 basis points more this year, after inflation rose to 6.1% in June, the fastest in nearly four years.

June headline printing broughtflation in the IfH1 averaged 4.4%, above the central bank’s 2-4% target but still below its 5% forecast for this year.

In the secondary market on Friday, 91-day, 182-day and 364-day Treasury bills were quoted at 1.8515%, 2.3971% and 2.6928%, respectively, based on PHP Bloomberg valuation benchmark rates. published on the Philippine Dealing System’s. website.

Meanwhile, the 10-year bond yielded 6.9239%, while the seven-year term, the closest benchmark to the remaining life of the bonds at offst Tuesday, was quoted at 6.4363%.

Last week, the BTr fully awarded its offer Treasury bills, raising 15 billion pesos as expected out of total bids of 32.76 billion pesos.

In detail, the Treasury raised 5 billion pesos as expected from its 91-day securities offering, with the duration attracting 18.67 billion pesos in bids. The average tenor rate climbed 5.3 basis points to 1.908 from 1.855% in the previous auction. Accepted rates ranged from 1.725% to 1.95%.

BTr also borrowed 5 billion pesos as planned on 182-day debt securities, with total tenders reaching 6.38 billion pesos. The average tenor rate increased by 20.8 basis points to 2.608% from the 2.4% recovered for a partial allocation previously, as the government accepts offers ranging from 2.428% to 2.85%.

Finally, the government fully allocated 5 billion pesos in 364-day debt securities, with offers reaching 7.71 billion pesos. The average rate for the one-year term climbed 18.1 basis points to 2.811% from the 2.63% seen in the previous auction, with assigned bid yields in the range of 2, 6 to 2.924%.

On the other hand, the reissued 10-year papers that will be offered on Tuesday were auctioned for the last time off on February 18, 2020, where the BTr allotted the entire bond of 30 billion pesos at an average rate of 4.409%.

The Treasury wants to raise 200 billion pesos on the domestic market in July, or 60 billion pesos via treasury bills and 140 billion pesos via treasury bonds.

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

Garland K. Long