Rates of T-bills, T-bonds to rise as gov’t cuts GDP goal

RATES of government securities on offer this week will likely increase after economic managers trimmed the country’s growth outlook and as investors await the Treasury’s September borrowing plan.

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

On Tuesday, the BTr will auction off P35 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 11 years and seven months.

A bond trader said rates of the T-bills will continue to move sideways, while the 20-year T-bonds could fetch a higher average yield between 4.2% and 4.375%.

“The bulk of FXTN issuances is at the belly to long end of the curve this month, while the market is anticipating the supply for September,” the trader said via Viber.

The trader added that the government’s move to lower its growth target, as well as Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno’s comments that the central bank is unlikely to cut banks’ reserve requirements anytime soon, could also affect yield movements this week.

A second bond trader also expects the rates of the short-term debt papers to move sideways but gave higher 4.25-4.4% forecast for the yield on the 20-year papers.

“Investors will continue to demand a little higher rate for this bond due to frequency of supply and tenor,” the trader said via Viber.

The interagency Development Budget Coordination Committee on Wednesday slashed its gross domestic product (GDP) growth target for the year to 4-5% from the already downgraded 6-7% goal after the government tightened restrictions anew in Metro Manila and other parts of the country due to a surge in coronavirus infections.

Meanwhile, Mr. Diokno earlier said cutting lenders’ reserve ratios now would be “untimely and not justified” as there is still a lot of liquidity in the financial system.

At the secondary market on Friday, the rates of the 91-, 182- and 364-day T-bills stood at 1.138%, 1.43% and 1.624%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the yield on the 10-year bonds, which is the closest benchmark tenor to the remaining life of the reissued 20-year papers on offer on Tuesday, stood at 4.088%.

The BTr raised P15 billion as planned via the T-bills it offered last week as the auction attracted P53.276 billion in tenders, making it 3.6 times oversubscribed.

Broken down, it borrowed P5 billion as planned via the 91-day papers at an average rate of 1.066%, a tad higher than the 1.064% quoted in the Aug. 16 auction.

It also raised P5 billion as programmed from the 182-day T-bills. The average yield on the six-month debt stood at 1.407%, unchanged from the previous week’s level.

Lastly, the Treasury made a full P5-billion award of the 364-day securities it offered as the tenor’s average rate fell to 1.617% from 1.625% previously.

Meanwhile, the last time the BTr auctioned off the reissued 20-year T-bonds on offer on Tuesday was on June 29, when it made a full P35-billion award out of bids worth P65.265 billion.

The T-bonds fetched an average rate of 4.187%, higher by 55.2 basis points than the paper’s 3.635% coupon.

The Treasury is looking to raise P200 billion from the local market this month: P60 billion via weekly offers of T-bills and P140 billion from weekly auctions of T-bonds. The BTr is expected to release its borrowing plan for September in the coming days.

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 GDP. — B.M. Laforga

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