Treasury bills, bonds to get higher rates

RATE of public securities on offer this week are expected to move sideways with a slight upward bias as the market expects the Bangko Sentral ng Pilipinas (BSP) to continue to raise borrowing costs.

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 35 billion pesos in reissued seven-year Treasury bills (T-bonds) with a remaining life of six years and 10 months.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said Treasury bill rates on offer this week could end slightly higher and track secondary market returns.

Yields in the secondary market mostly rose last week on expectations of further gradual BSP tightening on the back of higher prices.flation which could also be affected by the recent decline of the peso against the dollar.

The IfThe leading trader also said on Friday that the average reissued seven-year paper rate could rise as the BSP is expected to continue raising benchmark interest rates. The trader gave a forecast range of 6.8% to 7.125% for the seven-year bond.

Meanwhile, a second bond trader said on Friday that yields on debt securities on offer this week are likely to remain stable due to abundant demand for longer maturities, noting the outcome of the auction of new bonds at 10 years old last week.

“[The] BTr able to almost fill the [P35 billion] the offer at 7.25% shows there is demand for this tenor,” the trader added. “Yields also haven’t budged despite the 25 BSP tightening [basis points (bps)]as conveyed by them for weeks before and with the threat of a CPI (Consumer Price Index) leak.

The trader expects the seven-year bond to reach rates ranging from 6.75% to 7%.

“The reissue of the seven-year-old newspaper on Tuesday could provide new direction. It will be a question of where the market wants to be compensated in relation to the amount of the concession award for the BTr,” said the second trader.

The BSP raised benchmark interest rates by 25 basis points on Thursday for a second consecutive meeting to cool the rise in prices and continued to signal a gradual normalization, although it said it was ready to “take all necessary political measures” to bringflration in its medium-term objective.

BSP raised its average inflration planned for this year at 5% against 4.6% previously, well above its target of 2 to 4%. For 2023, the BSP now sees inflaverage of 4.2% against 3.9% previously, then slows to 3.3%, back on target, in 2024.

Inflation rose to 5.4% in May, the highest in three and a half years, amid continued rises in food and fuel prices. The implementation of a daily minimum wage hike in 14 regions and a P1 increase in utility jeepney fares in Metro Manila, Central Luzon, Calabarzon and Mimaropa earlier this month will likely worsen the inflationary pressures.

While the market is hoping for a 50 basis point rise in the BSP as inflAs risks mount, the local currency fell to its lowest level in nearly 17 years on Friday, closing at 54.985 pesos against the dollar, according to data from the Philippine Bankers Association. It was the weakest of the peso Ifnish since it closed at P55.08 on October 27, 2005.

In the secondary market on Friday, 91-day, 182-day and 364-day Treasury bills were quoted at 1.6262%, 1.9347% and 2.4186%, respectively, based on PHP Bloomberg valuation benchmark rates. published on the Philippine Dealing System’s. website.

Meanwhile, the seven-year bond hit a rate of 6.6664%.

Last week, the BTr only raised P10.54 billion from its offer of treasury bills as rates rose at all maturities even as bids reached 22.605 billion pesos, above the 15 billion peso program.

Broken down, the Treasury partially allocated its offst 91-day treasury bills, raising only 3.07 billion pesos against the 5 billion peso program, even as tenders reached 11.285 billion pesos. The tenor’s average rate climbed 18.7 basis points to 1.759% from 1.572%.

Similarly, the BTr granted only P3.62 billion 182-day securities compared to the P5 billion offuh even if the offers reached 5.82 billion pesos. The average rate for the six-month term rose 19.8 basis points to 2.132% from 1.934%.

Finally, the government made a partial allotment of its offeur of one-year debt securities, borrowing only 3.85 billion pesos against the 5 billion peso plan even as tenders reached 5.5 billion pesos. The average one-year Treasury bill rate rose 12.9 basis points to 2.454% from 2.325%.

Meanwhile, the last time the Treasury offreissued the seven-year bondsffTuesday was May 17, where he raised just 20.1 billion pesos against the 35 billion peso program. The securities were allocated at a coupon of 6.5% with an average rate of 6.428%.

BTr wants to raise 250 billion pesos on the domestic market in June, ie 75 billion pesos via Treasury bonds and 175 billion pesos via Treasury bills.

The government borrows from local and external sources to help connect a budget ofIfcit capped at 1,650 billion pesos this year, or 7.6% of gross domestic product. — T. J. Tomas

Garland K. Long