Treasury and Bond Rates Move Sideways Amid Stable Demand

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GOVERNMENT RATES could move sideways or lower this week as demand is expected to remain stable amid excess liquidity in the market. Iffinancial system.

The Treasury Office offer 15 billion pesos in treasury bonds (treasury bonds) on Monday, or 5 billion pesos each in 91-, 182- and 364-day securities.

On Tuesday it will be auctioned off 35 billion pesos in reissue IfFive-year Treasury bonds (T-bonds) with a residual life of four years and two months.

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said the recent maturity of Treasury bonds worth more than 100 billion pesos had added excess liquidity to the system, which could lead to lower yields.

“Higher U.S. or global bond yields recently after more hawkish signals about possible Fed rate hikes, even at every Fed meeting and possible reduction in the Fed’s balance sheet or bond holdings, have partly leads some excess funds to park short-term for now,” Ricafort said in a Viber message.

Meanwhile, one trader said Treasury yields could move sideways, while reissued five-years could hit a rate of around 4% to 4.15%.

“There was a jump in government securities yields week-over-week as market participants reacted to Fed and Philippine gross domestic product news,” the trader said in a Viber message. “But we already know the market is still liquid, so that kind of tempers every sale.ff.”

U.S. Federal Reserve Chairman Jerome H. Powell said on Wednesday that the central bank may raise interest rates from March, although the pace of subsequent rate hikes remains to be determined, Reuters reported.

Meanwhile, the Philippines’ fourth-quarter gross domestic product (GDP) rose 7.7% for a 5.6% expansion for the year 2021, according to preliminary government data.

This is a reversal of the 9.6% contraction in 2020, but still below the pre-pandemic GDP growth of 6.1% seen in 2019.

In the secondary market on Friday, 91-day, 182-day and 364-day Treasury bills were quoted at 0.7562%, 1.0737% and 1.4404%, respectively, based on PHP Bloomberg valuation benchmark rates. published on the Philippine Dealing System website.

Four-year bonds, the closest benchmark to the remaining life of reissued papers to be auctioned off on Tuesday, reached a return of 3.8154%.

The government raised P15 billion as planned via treasury bills which it auctioned off Last week.

In detail, the Treasury raised 5 billion pesos as programmed via the 91-day securities from 27.98 billion pesos of offers. The average three-month debt securities rate fell 18.2 basis points (bps) to 0.693% from 0.875% previously.

The government also borrowed 5 billion pesos as planned through the 182-day instruments on Monday from 27.86 billion pesos in tenders. The average six-month Treasury bill rate fell 2 basis points to 1.0777% from 1.097% a week earlier.

Finally, the treasury office awarded all of the 5 billion pesos of the 364-day documents as bids reached 20.53 billion pesos. The average one-year yield came in at 1.41%, down 0.5bps from 1.415% the previous week.

Meanwhile, the last time the government offwandered the IfThe five-year treasury bills due to be auctioned on Tuesday took place on January 11, where they raised 22.126 billion pesos, less than the scheduled 35 billion pesos.

The debt securities were granted at an average rate of 4.012%.

The Treasury plans to raise 200 billion pesos domestically in February, or 60 billion pesos through treasury bills and 140 billion pesos from treasury bonds.

The government is borrowing from local and external sources to help finance a budget deficit capped at 7.7% of gross domestic product this year. — Jenina P. Ibanez with Reuters

Garland K. Long