RATES of the Treasury bill (T-bills) and Treasury bonds (T-bonds) on offer this week could climb due to worsening global risk sentiment amid the widening conflict in the Middle East after the United States joined the ongoing attacks between Iran and Israel.
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion each in 91- and 181-day papers and P9 billion in 364-day papers.
On Wednesday, the government will offer P40 billion in reissued T-bonds in a dual-tranche auction — P20 billion in seven-year bonds with a remaining life of two years and 10 months and P20 billion in 25-year notes with a remaining life of 24 years and seven months.
The T-bond auction was moved from the usual Tuesday schedule as June 24 is a holiday in the City of Manila.
T-bill and T-bond rates could mirror the broad rise in secondary market yields last week as risk sentiment in global markets turned sour amid the Iran-Israel conflict, 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 bonds on offer on Wednesday could be met with strong demand and fetch yields of 5.7% to 5.75%.
In contrast, the 25-year papers could be partially awarded amid a lack of tenders due to lingering market uncertainties, the trader said, adding that the tenor could be quoted at rates ranging from 6.75% to 6.85%.
“The next catalyst would be the release of the third-quarter borrowing schedule, which we think will be packed since we are confronted by a P500-billion maturity mid-August,” the trader added.
At the secondary market on Friday, the 91 and 182- day T-bills rose by 3.1 basis points (bps) and 5.13 bps week on week to end at 5.4714% and 6.213%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of June 20 published on the Philippine Dealing System’s website. Meanwhile, the 364-day tenor slipped by 0.74 bp to end at 5.6842%.
Meanwhile, the seven-year bond climbed by 6.45 bps week on week to yield 6.1857%, while the three-year paper, the tenor closest to the remaining life of the securities on offer this week, increased by 3.33 bps to end at 5.8258%.
The yield on the 25-year tenor likewise rose by 3.06 bps week on week to 6.6469%.
Last week, the BTr raised P26.7 billion from the T-bills it auctioned off, higher than the P25-billion plan as the offer was nearly thrice oversubscribed, with total bids reaching P74.205 billion.
This came even as the BTr made a partial award of the 91-day T-bill as strong demand prompted the Auction Committee to double its acceptance of noncompetitive bids for the 182-day tenor to P6.4 billion.
The Treasury awarded only P6.5 billion in 91-day T-bills, lower than the P8-billion plan, even as total tenders for the tenor reached P19.425 billion. The three-month paper fetched an average rate of 5.459%, 0.8 bp higher than the rate seen in the previous auction, with tenders accepted having yields of 5.443% to 5.49%.
Meanwhile, the government raised P11.2 billion from the 182-day securities, well above the P8-billion program, as bids amounted to P29.67 billion. The average rate of the six-month T-bill was at 5.523%, inching down by 0.1 bp from the prior week, with accepted rates ranging from 5.505% to 5.543%.
Lastly, the Treasury raised P9 billion as planned via the 364-day debt papers as demand for the tenor totaled P25.11 billion. The average rate of the one-year T-bill edged up by 0.1 bp to 5.657%. Accepted bids carried yields of 5.64% to 5.67%.
Meanwhile, the reissued seven-year bond to be auctioned off on Wednesday was last offered on May 14, where the government raised P15 billion as planned at an average rate of 5.703%, well above the 3.625% coupon rate.
For its part, the 25-year bond on offer this week was last auctioned off on March 27, where the government raised P25 billion as programmed at an average rate of 6.476%, also above the 6.375% coupon rate.
The Treasury wants to raise P230 billion from the domestic market this month, or P100 billion through T-bills and P130 billion via T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy
