Yields on government securities offered this week will likely be mixed amid concerns over rising inflation and impending rate hikes.
The Treasury Office (BTr) will offer on Monday 15 billion pesos in treasury bills (treasury bills), divided into 5 billion pesos each in debt securities at 91, 182 and 364 days.
On Tuesday it will be auctioned off reissued seven-year T-bonds with a residual maturity of six years and 10 months.
Two bond traders have said Treasury bill rates will continue to move sideways this week as investors seek to put their excess liquidity in these short-term safe-haven instruments.
However, for longer-term T bonds, traders expect its yield to explode amid fears of a rise inflation and possible tightening of the policy of the American central bank.
The Fifirst trader said that the average rate for seven-year bonds over offum Tuesday could go from 4.050% to 4.2%, while the second trader gave a higher estimate range of 4.15-4.3%.
“Traders will be watching inflation for the previous month as the BSP (Bangko Sentral ng Pilipinas) may consider raising interest rates sooner if theyflation remains high. Also some [US Federal Reserve] officials believe a reduction in bond purchases based on economic data could be justified as early as November, ”the second-largest bond trader said on Viber on Saturday.
A Business world poll of 17 analysts gave a median estimate of 5% for the September headline inflation, closer to the high end of the central bank’s estimate of 4.8% to 5.6% for the month and above its target of 2-4% for the year. If achieved, it will be faster than the 4.9% in August as well as the 2.4% a year earlier. It will also be the fastest print since December 2018 5.1%.
Analysts said rising food and utility prices along with base effects likely caused a continued upward trend infllast month.
The Philippine Statistics Authority will report in September inflData ation on Tuesday, October 5.
Meanwhile, the Fed said earlier it could hike rates as early as next year, as it could cut its monthly bond purchases by November, Reuters reported.
“The local bond market will also take into account the rally in global oil prices and the standoff raising the US debt ceiling [last] week ”, the Fifirst trader added.
Oil prices have hit nearly $ 80 a barrel due to depletion of stocks as oil producers struggle to meet growing demand amid a global economic recovery.
Meanwhile, Reuters reported that investors are becoming more nervous about the looming budget crisis if the US Congress does not decide whether or not the debt ceiling should be raised to avoid a possible government shutdown and its Fifirst fault.
Last week, the BTr increased the volume of treasury bills it allocated to 17 billion pesos as total tenders reached 63.865 billion pesos.
Broken down, it raised 5 billion pesos as expected on 91-day debt securities at an average rate of 1.06%, up from 1.07% the week before.
It also allocated 5 billion pesos as programmed in 182-day treasury bills, with its average yield falling to 1.385% from 1.389% previously.
Finally, the BTr borrowed 7 billion pesos via 364-day securities, higher than the 5 billion pesos plan, at an average rate of 1.582%, against 1.597% the previous week.
Meanwhile, the last time the Treasury offered the seven-year bonds was on September 21, when it allocated 35 billion pesos to the reissued papers and raised an additional 5 billion pesos through the tap facility. . The bonds attracted P76.128 billion bids while its average rate climbed to 3.826% from the 3.789% seen at the previous auction.
On Friday in the secondary market, 91-, 182- and 364-day T-bills were listed at 1.13%, 1.393% and 1.663% respectively, while the seven-year maturity reached 3.899%, according to PHP Bloomberg Valuation. Service Reference Rates published on the Philippine Dealing System website.
The BTr is looking to raise 200 billion pesos from the local market this month: 60 billion pesos through weekly treasury bill offers and 140 billion pesos from 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. – BM Laforga