RATES of the government securities (GS) to be auctioned off this week may end mixed on increased supply as the Bureau of the Treasury (BTr) resumes offering cash management bills (CMBs) amid fresh market volatility due to the re-escalation of the Middle East conflict.
On Monday, the Treasury will auction off up to a combined P90 billion in short-term securities.
Broken down, it will offer up to P40 billion in CMBs, or P20 billion in 35-day securities and P10-20 billion in 63-day papers. The BTr revived its CMB offerings in June for the first time since the pandemic to help manage short-term liquidity needs amid elevated rates but did not sell them in the past two weeks.
Meanwhile, it will also auction off P50 billion in Treasury bills (T-bills), or P20 billion each in 91- and 182-day debt and P10 billion in 364-day papers.
On Tuesday, the government is targeting to raise P30-40 billion from reissued seven-year Treasury bonds (T-bonds) with a remaining life of four years and five days.
A trader said GS rates may go up due to renewed tensions in the Middle East.
“Expect upward bias in yields as the BTr increased its four-year bond auction size to P30-40 billion from the usual P30 billion. Cash management bills were also reintroduced after being scrapped for two weeks,” a trader said in an e-mail.
“Expect a slow grind higher unless we see positive news in the Middle East.”
GS rates could follow the mixed week-on-week movements in secondary market yields amid fresh inflation concerns following renewed clashes between the US and Iran, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
At the secondary market on Friday, the one-month bill went down by 3.11 basis points (bps) week on week to yield 4.7243%, according to the PHP Bloomberg Valuation Service Reference Rates as of July 17 published on the Philippine Dealing System website.
The 91- and 364-day T-bills increased by 0.24 bp and 2.93 bps to close at 5.0601% and 5.9811%, respectively, while the 182-day debt dropped by 4.52 bps to 5.5324%.
For its part, the seven-year bond rose by 15.95 bps week on week to fetch 7.3008% on Friday, while the four-year debt, the tenor closest to the remaining life of the papers on offer this week, jumped by 17.75 bps to yield 7.014%.
At the last offering of CMBs on June 29, the government raised a combined P30 billion as planned from the papers as tenders reached P56.28 billion, or almost twice the amount on offer.
Broken down, it raised P20 billion from the 35-day securities as demand totaled P25.23 billion. The one-month paper fetched an average rate of 4.797%.
It also sold P10 billion in 63-day instruments as tenders reached P31.05 billion. Its average yield was at 5.081%.
Meanwhile, the BTr raised P50 billion as planned from the T-bills it auctioned off last week as total tenders reached P126.091 billion, over twice as much as the amount on offer.
Broken down, the Treasury borrowed P20 billion via the 91-day T-bills as demand for the tenor reached P56.385 billion. The three-month paper fetched an average rate of 5.097%, down by 4.6 bps week on week. Bids accepted had yields from 5.05% to 5.118%.
For the 182-day debt, the government also raised P20 billion as tenders hit P47.376 billion. The average yield on the six-month T-bill was at 5.707%, down by 2.2 bps from the last auction. Tenders awarded carried rates from 5.65% to 5.729%.
Lastly, the BTr sold P10 billion in 364-day securities as bids for the tenor totaled P22.33 billion. The one-year paper fetched an average rate of 5.972%, inching up by 0.8 bp. Accepted bid yields were from 5.94% to 6%.
On the other hand, the reissued seven-year T-bonds to be offered on Tuesday were last sold on June 23, where the government raised P30 billion as planned at an average rate of 6.816%, well above its 6.375% coupon rate.
The BTr wants to raise P410 billion from the domestic market this month, or P250 billion via T-bills and P160 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.659 trillion or 5.4% of gross domestic product this year. — Aaron Michael C. Sy