RATES OF government securities on offer this week may drop as the market waits for clearer hints from the US central bank on their plan to taper their bond-buying program.
The Bureau of the Treasury (BTr) is looking to raise P15 billion via the Treasury bills (T-bills) it will auction off on Tuesday, or P5 billion each in 91-, 182- and 364-day debt papers.
On Wednesday, the BTr will offer P35 billion in reissued five-year Treasury bonds (T-bonds) with a remaining life of four years and seven months.
The BTr moved the auction schedules as financial markets are closed today, Aug. 30, in observance of National Heroes Day.
Two bond traders said the average rates of the T-bills could move sideways from their week-ago levels amid ample demand for short-term debt.
Meanwhile, the first trader said the five-year T-bond’s average yield could range from 2.65-2.8% on Wednesday. The second trader gave a narrower forecast band of 2.75-2.85%.
The traders said the market will take their cue from the US Federal Chief Jerome H. Powell’s speech at the US central bank’s Jackson Hole symposium on Friday.
Mr. Powell said there has been clear progress toward maximum employment and that he was of the view that if the US economy evolved broadly as anticipated, “it could be appropriate to start reducing the pace of asset purchases this year,” Reuters reported.
However, he told the Fed’s annual late-August symposium in Jackson Hole, Wyoming, that the timing and pace of tapering does not involve a signal for when interest rates will begin to rise, a message the market perceived as being dovish.
“While there is no specific timetable or signals for tapering of bond purchases, investors may assume that tapering will likely not happen this year and that may drive the demand for notes at the belly of the curve,” the first trader said.
The BTr last week borrowed P15 billion as planned via its auction of T-bills as total tenders hit P50.867 billion.
Broken down, it raised the programmed P5 billion via the 91-day debt papers at an average rate of 1.077%, slightly higher than the 1.066% seen on Aug. 16.
The government also borrowed P5 billion as planned via the 182-day T-bills. The six-month debt was quoted at an average rate of 1.408%, inching up from the week-ago level of 1.407%.
Lastly, the Treasury made a full P5-billion award of the 364-day papers it offered as the tenor’s average rate eased to 1.612% from 1.617% the previous week.
Meanwhile, the last time the BTr offered the five-year bonds on the auction block on Wednesday was on May 6, when it made a full P35-billion award out of P75.716 billion in bids.
The papers fetched an average rate of 3.295% at that auction, lower than the 3.3% coupon quoted for the bonds when they were first offered on April 6.
At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.141%, 1.442% and 1.632%, respectively, while the five-year tenor ended at 2.965%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.
The Treasury is looking to raise P250 billion from the local market in September: 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 with Reuters