T-bill and bond rates could rise amid concerns over high inflation

By on October 10, 2021 0

RATES on government securities could increase slightly this week inflthe nation’s concerns and the hawkish signals from the US Federal Reserve.

The Treasury Office (BTr) will auction 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.

On Tuesday, it will offer 35 billion pesos of reissued five-year Treasury bonds (Treasury bonds) with a remaining term of four years and five months.

Two bond traders said Treasury bill rates are likely to continue to move sideways, with the lead trader adding that there may be a slight upward bias from the previous auction.

“Demand may continue to be evident across all three tenors, with investors still looking to park excess liquidity in the immediate end of the curve,” the lead trader said in a Viber message.

For longer-term T bonds, the leading trader stated that the average rate of Fifive-year notes on offer Tuesday could go 3.25% to 3.35%, while the second trader gave a higher estimate range of 3.35% to 3.55%.

Both traders said dealers were waiting for more signals from the US Federal Reserve on the timing of its plan to reduce its monthly asset purchases.

The Fed said it could start cutting its monthly bond purchases as early as November and signaled that interest rate hikes could follow faster than expected.

At home, traders said the market remains concerned about rising prices.flation.

“Some … inflCyclical pressures such as rising global oil prices and the announcement of a Meralco (Manila Electric Co.) electricity rate hike this month have kept the market on the sidelines, with local bond yields s ‘adjusting upwards’, Fisaid the first trader.

Headline inflation stood at 4.8% in September, slowing from 4.9% recorded in August, but faster than the 2.3% recorded in the same month last year, reported the Philippines Statistics Authority last week.

September inflation hit the lower end of Bangko Sentral ng Pilipinas’ 4.8% to 5.6% forecast range this month.

Average inflation for the FiThe first nine months hit 4.5%, above the central bank’s 2-4% target and 4.4% expected this year.

Meanwhile, Reuters reported on Friday that oil prices rose as industries turn to oil from high-priced gas and over doubts the U.S. government would release oil from its strategic reserves. US West Texas Intermediate crude futures rose 1.1% to $ 79.14 per barrel, while Brent crude futures rose 1% to $ 82.75 per barrel.

The BTr made a full allotment of treasury bills he offered last week even as rates climbed across the board due to the persistence offlfears of the nation.

Broken down, the government raised 5 billion pesos as planned via 91-day debt securities from 13.01 billion pesos in the bids. Three-month Treasuries hit an average rate of 1.085%, up 2.5 basis points (bps) from 1.06% seen the week before.

He also borrowed the 5 billion pesos programmed through 182-day treasury bills, as the tenor attracted bids worth 22.42 billion pesos. The six-month average paper yield rose 0.6 bps to 1.391% from 1.385% a week earlier.

Finally, the Treasury has granted a full allocation of 5 billion pesos of 364-day debt securities from 20.93 billion pesos in the context of tenders. One-year bonds reached an average rate of 1.584%, up 0.2bp from the 1.582% quoted the previous week offer.

Meanwhile, the last time the BTr auctioned off the reissued Fi5-year T-bonds on offum Tuesday was September 1, when he awarded 35 billion pesos the papers from 76.167 billion pesos of tenders.

Debt securities reached an average rate of 2.746% in this auction, down 54.9 basis points from the 3.295% recorded in the previous offer. This rate was also lower than the series’ 3.375% coupon.

The BTr is looking to raise P200 billion in the local market this month: P60 billion from the weekly offers of treasury bills and 140 billion pesos of 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. – Jenina P. Ibañez with Reuters