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Rates of T-bills, T-bonds to inch up on RDB offer

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RATES of government securities on offer this week may move sideways or inch up as the dual-tranche offering of onshore retail dollar bonds (RDBs) continues.

The Bureau of the Treasury (BTr) will offer P15 billion in Treasury bills (T-bills) on Monday, broken down into P5 billion each in 91-, 182- and 364-day debt papers.

The BTr will also auction off P35 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of six years and 10 months on Tuesday.

Two bond traders interviewed on Friday said T-bill rates will continue to move sideways this week as investors park their excess liquidity in these short-term safe-haven assets.

However, for the reissued seven-year bonds, a first trader expects its yield to be slightly higher than what was quoted during the previous auction due to weaker demand for long-term debt. The trader sees the average rate of the T-bonds ranging from 3.775% to 3.9%.

“Yields are expected to have an upward bias due to weakening demand for long-term government securities, and as investors’ focus is currently on the RDBs,” the trader said in a Viber message.

The BTr on Sept. 15 started offering five-year and 10-year RDBs, which have coupon rates of 1.375% and 2.25%, respectively. It is set to end the offer period on Oct. 1, unless closed earlier.

The Treasury raised an initial $866.2 million during the price-setting auction for the RDBs on Wednesday, more than twice as much as the initial offer of $400 million amid high demand. Broken down, it sold $551.8 million worth of five-year RDBs and another $314.4 million in 10-year dollar-denominated notes.

This marked the first time the government offered onshore RDBs. The papers are available at a minimum investment of $300 (P15,000), with increments of $100 thereafter.

A second trader gave a slightly lower range of 3.75%-3.85% for the reissued seven-year papers, citing the market’s cautious stance ahead of policy meetings of the Monetary Board of the Philippine central bank and the Federal Open Market Committee this week.

“[The market will also price in] renewed inflation concerns brought by rising energy prices, after Meralco (Manila Electric Co.) announced it will hike its power rates anew,” the second trader said.

A BusinessWorld poll conducted last week showed 17 out of 18 analysts expect the Bangko Sentral ng Pilipinas (BSP) to keep benchmark rates at record lows at its policy meeting on Sept. 23, Thursday.

Analysts said the BSP may look past rising inflation as economic recovery remains “fragile.”

Meanwhile, headline inflation quickened to 4.9% in August from 4% in July, its fastest pace in more than two years or since the 5.2% seen in December 2018, amid rising food and utility costs.

This brought the eight-month average to 4.4%, above the central bank’s target of 2-4% and forecast of 4.1% for the year.

The BTr last week made a full award of the P15 billion T-bills it offered as total tenders reached P63.273 billion and rates moved sideways.

Broken down, it raised P5 billion as programmed via the 91-day debt papers at an average rate of 1.079%, a tad higher than the 1.078% seen on Sept. 6.

The Treasury also borrowed P5 billion as planned via the 182-day T-bills, with its average yield slipping to 1.402% from 1.405% a week ago.

Lastly, it made a full P5-billion award of the 364-day securities it offered at an average rate of 1.604%, down from 1.609% previously.

Meanwhile, the last time the BTr offered the reissued seven-year bonds was on Sept. 7 when it made a full P35-billion award from P77.091 billion in tenders.

The notes were quoted at an average rate of 3.789%, slightly higher than the 3.75% coupon fetched for the papers when they were first offered the month prior.

At the secondary market on Friday, the 91-, 182- and 364-day T-bills were quoted at 1.113%, 1.383% and 1.633%, respectively, while the seven-year tenor fetched 3.611%, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

The Treasury is looking to raise P250 billion from the local market this month: P75 billion via weekly offers of T-bills and P175 billion from weekly auctions of T-bonds.

The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of gross domestic product. — B.M. Laforga

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