YIELDS on the government securities to be offered this week may end mixed as demand may stay weak as the market remains wary of risk assets, and with players looking ahead to the Bangko Sentral ng Pilipinas’ (BSP) policy meeting.
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 P30 billion from reissued 20-year Treasury bonds (T-bonds) with a remaining life of four years and nine months.
Rates of government debt on offer this week could track the mixed week-on-week movements at the secondary market, with yields on short-term debt going down and those at the belly and long end rising, amid expectations of a BSP hike this week due to heightened inflation pressures, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
A trader said the market was “dead quiet” on Friday as it consolidation continued. “The five-year auction will put more pressure on yields [this] week… General market sentiment is still defensive on lack of good news locally and abroad.”
The T-bonds could see “tepid” demand and fetch rates from 7.75% to 7.8% due to broad risk-off sentiment, the trader added.
At the secondary market on Friday, yields on the 35-, 91-, and 182-day bills went down by 19.78 basis points (bps), 8.51 bps, and 2.49 bps week on week to close at 5.3198%, 5.6764%, and 6.0671%, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System website. Meanwhile, the 364-day T-bill rose by 11.12 bps to close at 6.3193%.
For its part, the yield on the 20-year bond rose by 18.8 bps week on week to end at 8.3856%, while the five-year paper, the tenor closest to the remaining life of the notes to be offered on Tuesday, climbed by 4.9 bps to 7.6738%.
A BusinessWorld poll showed 20 of 22 analysts expect the Monetary Board to raise the target reverse repurchase rate by 25 basis points (bps) to 5.25% at its policy meeting on Thursday.
This would match the benchmark rate set in June 2025 and will be the highest in one-and-a-half years since the 5.5% in April 2025.
On the other hand, two analysts priced in a 50-bp rate hike this week, saying that a more aggressive move could prevent the BSP from falling behind the curve.
The Treasury last offered 35-day CMBs on Oct. 5, where it raised just P8.915 billion out of the P10-billion target at an average rate of 5.229%.
Last week, the BTr borrowed only P39.917 billion from the T-bills it auctioned off, short of the P45-billion target, even as total tenders reached P61.232 billion.
Broken down, the Treasury raised just P16.94 billion via the 91-day T-bills, lower than the P20-billion plan, with demand for the tenor reaching P22.1 billion. The three-month paper fetched an average rate of 5.845%, rising by 17.8 bps from the previous week. Bids accepted had yields from 5.74% to 5.9%.
For the 182-day debt, the government borrowed only P12.987 billion, below the P15-billion program even as tenders hit P21.787 billion. The average yield on the six-month T-bill was at 6.171%, climbing by 20 bps from the last auction. Tenders awarded carried rates from 6% to 6.25%.
Meanwhile, the BTr sold its target P10 billion in 364-day papers as bids for the tenor totaled P17.345 billion. The one-year paper fetched an average rate of 6.351%, increasing by 13.7 bps week on week. Accepted bid yields were from 6.175% to 6.443%.
On the other hand, the 20-year notes up for auction on Tuesday were last offered on Sept. 22, where the government raised P30 billion as planned at an average rate of 7.438%, below the 8% coupon.
The BTr is aiming to raise P418 billion from the domestic market this month or P168 billion through 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. — Aaron Michael C. Sy