Rates on Treasury bills and Treasury bonds will gradually increase on RDB supply

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RATES on government securities offered this week could move sideways or slightly higher as the two-tranche supply of onshore retail dollar bonds (RDBs) continues.

The Treasury Office (BTr) will offer on Monday 15 billion pesos of treasury bills (treasury bills), divided into 5 billion pesos each in debt securities at 91, 182 and 364 days.

The BTr will also auction off On Tuesday, 35 billion pesos of reissued seven-year Treasury bonds (Treasury bonds) with a remaining term of six years and 10 months.

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

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

“Yields are expected to trend higher due to weakening demand for long-term government securities, and as investors are currently focusing on RDBs,” the trader said in a Viber message.

On September 15, the BTr began to offer Fithe 5-year and 10-year RDBs, which have coupon rates of 1.375% and 2.25%, respectively. It is expected to end the offer period on October 1, unless it is closed earlier.

The Treasury raised an initial sum of $ 866.2 million in the RDB price-fixing auction on Wednesday, more than double the initial offer of $ 400 million amid strong demand. Broken down, it sold $ 551.8 million in five-year RDBs and $ 314.4 million in 10-year dollar-denominated notes.

This marked the FiFor the first time, the government has offered onshore RDBs. Papers are available for a minimum investment of $ 300 (P15,000), with increments of $ 100 thereafter.

A second trader gave a slightly lower range of 3.75% to 3.85% for the reissued seven-year papers, citing the cautious stance of the market ahead of the policy meetings of the Philippine Central Bank’s Monetary Council and the Federal Committee of the open market this week.

“[The market will also price in] new inflation concerns caused by rising energy prices, after Meralco (Manila Electric Co.) announced that it would again increase its electricity rates, ”said the second operator.

A Business world A poll taken last week showed that 17 out of 18 analysts expect the Bangko Sentral ng Pilipinas (BSP) to keep benchmark rates at record highs at its September 23 policy meeting on Thursday.

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

Meanwhile, a title inflInflation accelerated to 4.9% in August from 4% in July, its fastest pace in more than two years or since the 5.2% observed in December 2018, in a context of rising costs food and utilities.

That 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.

Last week, the BTr fully allocated the 15 billion peso treasury bills it offered, with total tenders reaching 63.273 billion pesos and rates moved sideways.

Broken down, it raised 5 billion pesos as scheduled through 91-day debt securities at an average rate of 1.079%, slightly higher than the 1.078% seen on September 6.

The Treasury also borrowed 5 billion pesos as planned via 182-day Treasuries, its average yield sliding to 1.402% from 1.405% a week ago.

Finally, he allocated P 5 billion on the 364-day securities he was offering at an average rate of 1.604%, against 1.609% previously.

Meanwhile, the last time the BTr offered the reissued seven-year bonds was on September 7, when it granted a full 35 billion peso allotment of 77.091 billion pesos in appeals. offers.

The notes were quoted at an average rate of 3.789%, slightly higher than the coupon of 3.75% obtained for the papers when they were issued. Fifirst of allffst the previous month.

On Friday in the secondary market, 91-, 182- and 364-day Treasuries were listed at 1.113%, 1.383% and 1.633%, respectively, while the seven-year maturity reached 3.61%, according to the PHP Bloomberg Valuation. Service Reference Rates published on the Philippine Dealing System website.

The Treasury is looking to raise 250 billion pesos from the local market this month: 75 billion pesos through weekly Treasury bill offers and 175 billion pesos from weekly Treasury bond auctions.

The government wants to borrow P3 trillion from domestic and external sources this year to help finance a budget ofFicit reached 9.3% of gross domestic product. – BM Laforga

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