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T-bill, T-bond rates seen mixed as lockdown stays

T-bill, T-bond rates seen mixed as lockdown stays

GOVERNMENT securities on offer this week will likely end mixed as the market braces for the impact of the extended lockdown on the economy.

The Bureau of the Treasury (BTr) is set to raise P25 billion via the Treasury bills (T-bills) on Monday, broken down into P5 billion in 91-day papers, P8 billion in 182-day debt and P12 billion in 364-day instruments.

On Tuesday, the BTr will offer P35 billion of fresh five-year Treasury bonds (T-bonds).

A bond trader estimated that T-bill rates will move sideways from the yields fetched in the previous auction last week, while a second trader sees them inching down by 5 basis points (bps).

Meanwhile, the first trader said the five-year bonds could fetch a coupon between 3.375% and 3.5%, the second trader gave a 3.25-3.5% forecast range, while a third trader estimated this could range from 3.35% to 3.6%.

The first trader attributed the projected lower T-bill rates to expectations that economic managers will meet to downgrade their growth projections for the year on dimmer economic outlook.

“Despite the increased offer volume, strong demand will still be evident on risk aversion amid the continued rise in COVID-19 cases in the National Capital Region (NCR) which triggered the government to impose another round of a stringent lockdown,” Kevin S. Palma, peso sovereign debt trader at Robinsons Bank Corp., said on Sunday when sought for comment.

The government extended for one more week the hard lockdown imposed in Metro Manila, Bulacan, Cavite, Laguna and Rizal amid the sustained spike in daily infections. The end of the strict lockdown was moved to April 11 from the initial plan to end it on April 4.

The Development Budget Coordination Committee (DBCC) will have to meet again to review its macroeconomic forecasts for the year, according to Budget Secretary Wendel E. Avisado last week. However, there is still no set date and agenda for the upcoming meeting.

During the auction last week, the BTr hiked the volume of T-bills it awarded to P24 billion from P79.33 billion in bids.

It raised P7 billion from the 91-day debt, higher than the P5-billion program. The average rate of the three-month papers fell to 1.269% from the 1.336% fetched on March 22.

It borrowed another P7 billion from the 182-day T-bills, more than the P5-billion plan, at an average rate of 1.609%, down from 1.718% previously.

Lastly, the Treasury made a full P10-billion award of the one-year securities, at an average rate of 1.926%, against the 1.997% quoted previously.

The last time the BTr offered five-year bonds was on May 27 last year, when it raised P30 billion in reissued T-bonds from P118.422 billion in bids. The notes fetched an average rate of 2.676%, lower than the 4.018% previously.

“The government reimposed restrictions which will dampen growth expectations but the long-term view remains that the country will still post modest growth by the end of the year causing yields for the 5-year bonds to rise a bit. However, a prolonged lockdown may change this,” the third trader said.

At the secondary market on Friday, the 91-, 182-, and 364-day debt were quoted at 1.284%, 1.52%, and 1.908%, while the five-year tenor was at 3.395%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

“We don’t expect the market to be aggressive on the 5-year paper given the inflation outlook,” the first trader added.

Headline inflation in March may have quickened slightly and remained beyond the central bank’s target amid high food and transport costs, according to analysts in a BusinessWorld poll of 13 analysts last week. The poll resulted in a median estimate of 4.8% inflation rate.

If realized, this would be quicker than both the 4.7% in February as well as the 2.5% a year earlier. This would also mark the third straight month of inflation beyond the central bank’s 2-4% target.

The Philippine Statistics Authority will report the official March inflation data on April 6.

The Treasury wants to raise P170 billion from the local bond market in April, broken down into P100 billion in T-bills to be offered weekly and P70 billion via fortnightly auctions of T-bonds.

The government is looking to borrow P3 trillion this year from domestic and external lenders to help fund its budget deficit, which is seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga





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