Treasury bill rates and bonds will move sideways on a stable BSP policy
Government SECURITY RATESlinks for auction off this week is likely to move sideways after the central bank kept borrowing costs at record highs in its last policy meeting.
The Treasury Office (BTr) is seeking to borrow 15 billion pesos via treasury bills (treasury bills) on Monday, broken down into 5 billion pesos each from 91, 182 and 364 day papers.
On Tuesday, the Treasury will auction 35 billion pesos of 20-year reissued Treasury bonds (T-bonds), which have a remaining term of 11 years and eight months.
Traders said they expect T-bill rates to move sideways or slightly down 5 basis points (bps) on Monday from yields quoted at last week’s auction. .
â€œT-bill yields will only move sideways from the previous auction. The strong demand will persist as the market is still very flooded with liquidity and some players choose to park their funds on the short end of the curve while waiting for firm developments, â€said the Fisaid the first trader.
Meanwhile, the FiThe first trader expects the average rate on the reissued 20-year notes to be between 4% and 4.25%, while a second trader gave a narrower forecast range of 4.1% to 4. , 25%.
“The 11-year reissue is also expected to be met by strong demand, as yield hunters are currently in this segment of the curve as inflation fears subside,” he added. Fifirst noted trader.
The second trader said the market would also take into account the decision of Bangko Sentral ng Pilipinas (BSP) to keep benchmark rates stable to support the recovery of the economy.
The BSP kept its key rate at an all-time high for a fifth consecutive meeting on Thursday, as it pledged to maintain an accommodative stance to stimulate the economy.
The central bank left the overnight repo facility rate at 2%, as predicted by 14 of 16 analysts in a Business world survey. Interest rates on the deposit and demand loan facilities were also maintained at 1.5% and 2.5% respectively.
During this meeting, the central bank raised itsflation outlook for this year to 4% compared to the previous forecast of 3.9%. This corresponds to the upper end of the BSP’s 2-4% target.
If this were to happen, it would be faster than the 2.6% recorded in 2020.
On the other hand, inflis expected to reach 3% on average for 2022 and 2023.
Headline inflation stood at 4.5% for the third consecutive month in May. Inflation for the Fifirst Fifive months of the year averaged 4.4%.
The second trader added that government bond rates will also follow U.S. Treasury yields ahead of the June release inflsupply data July 6.
The benchmark 10-year U.S. Treasury rate jumped to 1.54% on Friday, from 1.5% a week ago.
Last week, the BTr increased the volume of treasury bills it allocated to 17 billion pesos from the original 15 billion peso program, with total bids reaching 59.064 billion pesos, nearly four times the proposed amount.
Broken down, it borrowed 5 billion pesos as expected on the 91-day paper at an average rate of 1.078%, 4 basis points lower than the 1.118% recorded in the June 14 auction.
The Treasury also allocated 5 billion pesos to the 182-day papers. The average tenor rate stood at 1.348%, down 2.4bp from 1.372% previously.
Finally, the government raised 7 billion pesos via 364-day bonds, higher than the 5 billion pesos plan. One-year treasury bills were quoted at an average rate of 1.563%, down 1.4bp from the 1.577% bid the week before.
Meanwhile, the 20-year T bonds on offst Tuesday have not been reissued since its first issue on March 21, 2013. In this auction, the BTr raised 25 billion pesos while the bids reached 118.33 billion pesos and the banknotes obtained a coupon rate of 3.635%.
On Friday in the secondary market, 91-, 182- and 364-day T-bills were listed at 1.822%, 1.4173% and 1.6286% respectively, based on the PHL Bloomberg valuation benchmark rates published on the Philippine Dealing System website. . Meanwhile, the 20-year paper hit 4.9578%, while the 10-year T bond – the benchmark term closest to the remaining term of the series of bonds offered on Tuesday – has was listed at 3.8962%.
This week’s public debt auctions are the last in June. BTr wants to borrow P215 billion from the local debt market this month: P75 billion via weekly offers of treasury bills and 140 billion pesos of weekly treasury bond auctions.
Next month, the Treasury is scheduled to raise 235 billion pesos on the local market.
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. – LWT Noble