RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could end mixed as markets remain watchful of developments in the Middle East and signals from the US Federal Reserve on their monetary easing path.
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion each in 91- and 180-day papers and P9 billion in 364-day papers.
On Tuesday, the government will offer P30 billion in reissued seven-year T-bonds with a remaining life of five years and 25 days.
T-bill and T-bond rates could track the mixed week-on-week movements at the secondary market that came amid the fragile ceasefire between Iran and Israel and shifting Fed cut expectations following mixed hints from Fed officials last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
A trader said in an e-mail that the reissued seven-year T-bonds could fetch rates of 5.875% to 5.925% amid “decent demand.”
At the secondary market on Friday, the 91-, 180-, and 364- day T-bills rose by 0.08 basis point (bp), 2.07 bps, and 1.13 bps week on week to end at 5.4794%, 5.642%, and 5.6955%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of June 27 published on the Philippine Dealing System’s website.
Meanwhile, the seven-year bond’s yield went down by 8.16 bps week on week to close at 6.1041%, while the five-year paper, the tenor closest to the remaining life of the T-bonds on offer this week, likewise dropped by 6.47 bps to end at 5.9341%.
Last week, the BTr raised just P24.6 billion from the T-bills it auctioned off, short of the P25-billion plan, even as the offer was more than twice oversubscribed, with total bids reaching P65.47 billion.
The Treasury awarded only P4.4 billion in 91-day T-bills, well below the P8-billion plan and even as total tenders reached P20.49 billion. The three-month paper was quoted at an average rate of 5.53%, 1.9 bps from the previous auction, with tenders accepted having yields of 5.45% to 5.555%.
Meanwhile, the government raised P11.2 billion from the 181-day securities, higher than the P8-billion program, as bids amounted to P25.125 billion. The average rate of the six-month T-bill was at 5.557%, up by 3.4 bps, with accepted rates ranging from 5.522% to 5.588%.
Lastly, the Treasury raised P9 billion as planned via the 364-day debt papers as demand totaled P19.855 billion. The average rate of the one-year T-bill inched down by 0.2 bp to 5.655%. Accepted bids carried yields of 5.55% to 5.695%.
On the other hand, the reissued seven-year bonds to be offered on Tuesday were last auctioned off on June 3, where the BTr raised P30 billion as planned at an average rate of 5.887%, below the 6.375% coupon rate.
Q3 BORROWING PLANFor the third quarter, the government is looking to raise a total of P690 billion from the domestic market, or P325 billion via T-bills and P365 billion through T-bonds, the Treasury announced last week. This is lower than the P735-billion domestic borrowing plan in the second quarter.
For July, the BTr wants to raise P250 billion from the domestic market, or P125 billion through T-bills and P125 billion via T-bonds.
Broken down, it wants to borrow P25 billion at each of its five T-bill auctions to be held on June 30 and July 7, 14, 21, and 28. It will offer P8 billion each in 91- and 180-day papers and P9 billion in 364-day papers at each auction.
It will also auction off P30 billion in five-year T-bonds on July 1, P30 billion in seven-year notes on July 8, P25 billion in 10-year papers on July 15, P20 billion in three-year bonds on July 22 and P20 billion in 20-year notes on July 29.
Meanwhile, in August, the BTr wants to borrow P220 billion, or P100 billion through T-bills and P120 billion via T-bonds.
The Treasury will offer P25 billion in T-bills — P8 billion in 91- and 182-day debt and P9 billion in 364-day papers — at auctions scheduled for Aug. 4, 11, 18, and 26.
The government will also offer P30 billion in five-year T-bonds on Aug. 5, P30 billion in seven-year papers on Aug. 12, and P25 billion in 10-year notes on Aug. 19. On Aug. 27, it plans to raise P35 billion through a dual-tranche offering of three- and 25-year T-bonds.
Lastly, for September, the Treasury is targeting to raise P220 billion from domestic sources, or P100 billion from T-bills and P120 billion from T-bonds.
The BTr will auction off P25 billion in T-bills at auctions on Sept. 1, 8, 15, and 22, where it will offer P8 billion in 91- and 182-day papers and P9 billion in 364-day debt.
The government will also look to raise P30 billion from five-year T-bonds on Sept. 2, P30 billion from seven-year papers on Sept. 9, P25 billion from 10-year notes on Sept. 16, and a total of P35 billion via three- and 20-year bonds on Sept. 23.
A second trader said there were no significant changes in the offerings for the third quarter.
“It looks like they just staggered the issuance for July. Since this is similar to last quarter’s, investors will probably look at it on a per auction basis and demand will depend on the headlines,” the second trader said in a text message.
In the short term, yields could decline on expectations of further rate cuts from the Bangko Sentral ng Pilipinas, the trader added.
“We know that the BTr needs to borrow ahead of some jumbo maturities,” the trader said.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — A.M.C. Sy