GOVERNMENT SECURITIES on offer this week may fetch higher yields following the Bangko Sentral ng Pilipinas’ (BSP) outsized rate hike and expectations of further tightening ahead amid intensifying inflation pressures.
The Bureau of the Treasury (BTr) will auction off a combined P55 billion in short-term securities on Monday.
Broken down, it will offer P10 billion in 35-day cash management bills (CMBs).
For Treasury bills (T-bills), the BTr will sell P20 billion in 91-day papers, P15 billion in 182-day securities, and P10 billion in 364-day debt.
On Tuesday, the government is looking to raise P35 billion from a dual-tenor Treasury bond auction (T-bond), or P25 billion through seven-year debt with a remaining life of two years and 11 months, and P10 billion via 10-year bonds with a remaining life of nine years and three months.
Yields on the short-term bills and T-bonds could track the week-on-week increases recorded for comparable tenors at the secondary market, which came amid the BSP’s more hawkish stance, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Expect the T-bill auction this week to reprice significantly higher following the surprise 50-bp (basis point) hike,” a trader likewise said in an e-mail.
At the secondary market on Friday, yields on the 35-, 91-, 182-, and 364-day bills rose by 5.05 basis points (bps), 7.74 bps, 8.24 bps, and 11.48 bps week on week to close at 5.3703%, 5.7538%, 6.1495%, and 6.4341%, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System website.
The yield on the seven-year bond also increased by 9.18 bps week on week to end at 7.979%, while the three-year debt, the tenor closest to remaining life of the issue on offer this week, climbed by 16.64 bps to close at 7.4925%.
Meanwhile, the rate of the 10-year note was 3.56 bps higher week on week at 8.054%.
The Monetary Board on Thursday raised benchmark rates by 50 bps, a move predicted by only two out of the 22 analysts in a BusinessWorld poll that had the other 20 economists penciling in a smaller 25-bp increase.
This was the first 50-bp hike in nearly four years or since February 2023 and marked its fourth straight tightening move this year, bringing cumulative increases since April to 125 bps.
The BSP said the “decisive” move was necessary to address broadening price pressures and keep inflation expectations anchored amid further upside risks, especially with expectations of strong El Niño conditions over the coming months.
BSP Governor Eli M. Remolona, Jr. said further hikes are possible as they see inflation staying red-hot until next year.
The central bank retained its inflation forecast for this year at 6.1%, but raised the 2027 outlook to 6% from 5.4% previously. It kept its inflation estimate at 3.3% for 2028.
Headline inflation averaged 5.4% for the first nine months, well above the BSP’s 3% target.
Mr. Ricafort added that the peso’s plunge to fresh all-time lows, which raises imported inflation risks, could also increase the odds of more BSP rate hikes.
The peso closed at a record low for the fifth straight trading day on Friday, weakening by 9.5 centavos to end at P63.615 against the dollar.
Last week, the BTr raised a combined P54.23 billion from its offering of CMBs and T-bills, just short of the P55-billion plan despite total tenders reaching P92.212 billion.
Broken down, the Treasury borrowed P10 billion as planned via the 35-day CMBs as bids reached P23.012 billion. The one-month bill fetched an average rate of 5.278%, up by 4.9 bps from its last award on Oct. 5. Accepted bid yields were from 5.2% to 5.339%.
Meanwhile, the government raised P44.23 billion from the T-bills, a tad below the P45-billion target, even as tenders reached P69.2 billion.
For the 91-day debt, the government awarded the programmed P20 billion as bids for the tenor reached P28.48 billion. The three-month paper fetched an average rate of 5.992%, jumping by 14.7 bps from the last auction. Tenders accepted had yields from 5.825% to 6.14%.
The BTr also raised P15 billion as planned via the 182-day T-bills as tenders hit P24.48 billion. The average yield on the six-month T-bill was at 6.229%, climbing by 5.8 bps from in the previous week. Bid rates awarded were from 5.825% to 6.14%.
Meanwhile, the Treasury sold just P9.23 billion in 364-day securities, below the P10-billion plan even as demand reached P12.72 billion. The one-year paper fetched an average rate of 6.444%, up by 9.3 bps week on week. Accepted yields ranged from 6.25% to 6.5%.
On the other hand, the reissued seven-year bonds to be offered on Tuesday were last sold on Aug. 25, where the government raised P30 billion as planned at an average rate of 6.825%, below the 7% coupon rate.
Meanwhile, the 10-year notes up for auction were last awarded on Sept. 15, where the BTr only borrowed P6.032 billion out of the P10-billion plan as the average yield reached 7.525%, well above its 5.925% coupon rate.
The BTr wants to raise P418 billion from the domestic market this month, or P168 billion in T-bills and P250 billion via 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. — A.M.C. Sy