Treasuries and bonds could hit higher rates after central bank decision

BW FILE PHOTO

RATE of public securities on offer this week are expected to rise after the surprise rise in Bangko Sentral ng Pilipinas (BSP) on Thursday.

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 nine years and 11 months.

“[This] The FXTN 10-68 week’s reissue will be well received by the market, bouncing off good participation in last Tuesday’s auction,” the first trader said, noting that 10-year bonds could reach yields ranging from 6, 75% to 7%.

“We also found that even with [Thursday’s] up 75 basis points (bps), yields have not risen proportionately, indicating that current yields offer enough protection against the tightening and some future rate hikes. Investors are also anticipating a possible CPI (Consumer Price Index) spike for the Philippines given that we have seen oil prices ease in recent weeks,” said the Iffirst trader added.

The second trader said Treasuries on offer on Monday could see rates rise 10-20 basis points from those quoted at last week’s auction, while 10-year papers could hit highs. yields in the range of 6.7-6.875% to follow the secondary market. levels.

“The seven-year auction last week was so strong that it improved sentiment for bonds. Additionally, major commodity prices have already rebounded from their highs, which has also bolstered some of demand for local bonds. And with all these monetary tightening measures, the price pressures will be dampened and should be a positive catalyst for bonds on the forecast,” added the second trader.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also said yields on debt securities will be auctioned off this week could rise after the Philippine central bank’s decision to raise rates in an off– review of the cycle.

BSP unexpectedly raised benchmark interest rates by a record 75 basis points on Thursday and left the door open for further tightening amid growing risksflation, which already hit a nearly four-year high in June.

BSP Governor Felipe M. Medalla said the Monetary Board raised its policy rate to 3.25%, thffeffective immediately. Rates on deposit and overnight lending facilities were also raised by 75 basis points to 2.75% and 3.75%, respectively.

Mr Medalla said the “significant” rise was due to signs of “sustained and mounting price pressures” as well as the ripple effects of aggressive tightening in other countries, such as the United States. United, in a global contextflconcerns.

The decision was taken ahead of the Monetary Board’s August 18 review and follows back-to-back hikes of 25 basis points in May and June, bringing total increases for the year to 125 basis points.

On Friday, Mr. Medalla said in an interview with Bloomberg Television that he would not rule out another interest rate hike at the August review, although the need for a 50 basis point hike at the of this meeting be “much less now” after the 75- bp raise it Ifred off Thursday.

Title inflation rose 6.1% year-on-year in June, the fastest in nearly four years and topping the central bank’s target range of 2-4% for a third straight month. The average inflrate Iffirst half is 4.4%, still below the BSP’s annual forecast of 5%.

In the secondary market on Friday, 91-day, 182-day and 364-day Treasury bills were quoted at 1.9413%, 2.6167% and 2.8709%, respectively, based on PHP Bloomberg valuation benchmark rates. published on the Philippine Dealing System’s. website.

Meanwhile, the 10-year bond reached a yield of 6.7941%.

Last week, BTr raised just 13.16 billion pesos through its treasury bond auction, less than the 15 billion peso program, even with bids reaching 36.72 billion pesos , more than double the expected amount.

Broken down, the Treasury allotted a total of 5 billion pesos in 91-day securities, with the duration attracting 24.56 billion pesos in bids. The average tenor rate fell 3.2 basis points to 1.876%. Accepted rates ranged from 1.825% to 1.894%.

Meanwhile, the BTr raised only 4.1 billion pesos from the 182-day debt securities of the 5 billion peso program, even with total tenders reaching 7.05 billion pesos. The average tenor rate rose 29.9 basis points to 2.907%, with the government accepting offers ranging from 2.825% to 2.95%.

Finally, the government has only granted 4.06 billion pesos in 364-day debt instruments on the 5 billion peso plan, with offers reaching 5.11 billion pesos. The average rate for the one-year maturity rose 17 basis points to 2.981%, with yields on winning bids in the range of 2.8% to 3.143%.

Meanwhile, the 10-year-old documents reissued to be offered on Tuesday were last auctioned on June 21, where the BTr awarded some of the new papers worth 34.892 billion pesos from the 35 billion peso program.

The bonds were allotted at a coupon rate of 7.25%, 30.59 basis points higher than the 6.9441% quoted for the 10-year term on the secondary market prior to the auction. The rates offered by the participants varied from 6.95% to 7.37% for an average of 7.145%.

The Treasury wants to raise 200 billion pesos domestically this month, or 60 billion pesos through treasury bills and 140 billion pesos through 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