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Rates of Treasury bills, bonds to rise further as virus cases surge

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RATES OF government securities on offer this week are expected to climb further amid a fresh surge in coronavirus cases and rising US Treasury yields.

The Bureau of the Treasury (BTr) wants to borrow P20 billion via its auction of Treasury bills (T-bills) on Monday, broken down into P5 billion each via the 91- and 182-day debt papers and P10 billion from the 364-day securities.

On Tuesday, the BTr is looking to raise P30 billion from reissued 10-year Treasury bonds (T-bonds), which have a remaining life of nine years and three months.

Two bond traders said T-bill rates could move sideways to 5 basis points (bps) higher.

The first trader said rates of local government securities continue to track the sustained uptrend in US Treasury yields.

The yield on the benchmark 10-year US Treasuries breached the 1.7% mark to close at 1.74% on Friday, up 3 bps from 1.71% on Thursday. Week on week, the tenor rose by 10 bps from 1.64% on March 12.

Meanwhile, the second trader said rising coronavirus cases in the Philippines could boost demand for the short-term papers as investors turn to safe-haven assets.

“Inflation is still a concern and the depreciating peso might weigh on that while movements toward the long end of the curve may mirror that of rising US Treasury yields,” the second trader added.

New coronavirus cases in the country reached a fresh all-time daily high of 7,999 on Saturday, bringing the total infection count to 656,056.

The BTr last week raised P20 billion as planned via the T-bills from tenders worth P42.43 billion.

Broken down, it borrowed the programmed P5 billion in 91-day debt as bids for the tenor hit P13.458 billion. The three-month papers fetched an average rate of 1.232%, higher than the 1.139% seen during the March 8 auction.

It also raised P5 billion as planned via the 182-day T-bills from P8.632 billion in tenders. The average yield of the six-month papers spiked to 1.527% from 1.316% previously.

Lastly, the government made a full P10-billion award of the 364-day securities it offered, with demand reaching P20.34 billion. The one-year papers were quoted at a higher average rate of 1.99% against the 1.852% seen in the previous exercise.

Meanwhile, for the reissued 10-year bonds on offer on Tuesday, the first trader sees its average rate ranging from 4.5% to 4.55%, while the second trader gave a wider 4.45-4.7% forecast range.

The last time the Treasury offered the reissued 10-year T-bonds was at the Feb. 2 auction, where it made a full P30-billion award from P63 billion in bids at an average rate of 3.066%. The bonds carry a coupon rate of 2.875%.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills were quoted at 1.277%, 1.447% and 1.931%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website. Meanwhile, the 10-year bonds fetched 4.4636%.

The Treasury wants to raise P160 billion from the local securities market this month, broken down into P100 billion in T-bills to be offered weekly and P60 billion via fortnightly auctions of T-bonds. — Beatrice M. Laforga

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