GS rates to track secondary mart

YIELDS on government securities (GS) to be auctioned off this week may end mixed, tracking secondary market movements as rocky talks between the United States and Iran stoked fresh volatility.

On Monday, the Bureau of the Treasury (BTr) will offer up to P90 billion in short-term securities.

Broken down, it will sell P30 billion in cash management bills (CMBs), or P20 billion in 35-day instruments and P10 billion in 63-day bills.

It will also auction off up to P60 billion in Treasury bills (T-bills), or P20 billion each in 91- and 181-day papers and P10-20 billion in 364-day debt.

On Tuesday, the government is looking to raise P30 billion from reissued seven-year Treasury bonds (T-bonds) with a remaining life of three years and three months.

T-bill rates could be mostly higher, mirroring week-on-week movements in comparable secondary market benchmarks, on expectations of further monetary policy tightening here and in the United States, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This is even as global oil prices eased recently after the reopening of the Strait of Hormuz, he added.

Mr. Ricafort said the reissued seven-year bonds on offer on Tuesday could also fetch rates close to secondary market levels.

A trader said in an e-mail that the T-bonds could be “well bid,” with yields seen at 6.475% to 6.525%.

“GS market traded 10 bps (basis points) lower on the headline that Brent oil erased all of its wartime gains after flows through the Strait of Hormuz ramped up following progress on a US-Iran peace deal,” the trader said.

On Friday, yields on the one-month tenor and the 91- and 182-day T-bills rose by 17.38 bps, 10.34 bps, and 6.47 bps week on week to close at 4.9229%, 5.192%, and 5.5742%, respectively, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System website. Meanwhile, the 364-day paper went down by 4.22 bps to yield 5.9761%.

For its part, the seven-year bond went up by 1.6 bps week on week to yield 6.8389%, while the three-year paper, the tenor closest to the remaining life of the issue on offer this week, rose by 2.61 bps to yield 6.4894%.

Last week, the BTr raised P100 billion as planned from the CMBs and T-bills it auctioned off as total tenders reached P180.746 billion.   

For the cash management bills, the government sold its target P40 billion as bids reached P57.49 billion.

Broken down, it sold P20 billion in 35-day CMBs. The one-month paper fetched an average rate of 4.738%, rising by 12.7 bps from the tenor seen at the last auction. Accepted bid yields ranged from 4.66% to 4.79%.

The Treasury also raised P20 billion from the 63-day bills. The two-month papers fetched an average rate of 5.052%, up by 11 bps from the previous week. Accepted rates were between 4.875% and 5.125%. 

For the T-bills, the BTr fully awarded its P60-billion offer, with total tenders at P123.256 billion.

Broken down, the Treasury borrowed P20 billion via the 91-day T-bills. The three-month paper fetched an average rate of 5.217%, rising by 4.6 bps week on week. Bids accepted had yields from 5.1% to 5.29%.

For the 182-day debt, the government raised P20 billion. The average rate of the six-month T-bill was at 5.754%, up by 6 bps from the last auction. Tenders awarded carried rates from 5.575% to 5.8%.

Lastly, the BTr sold P20 billion in 364-day securities. The one-year paper fetched an average yield of 6.034%, down by 9 bps from the previous week. Accepted bids had rates from 5.948% to 6.08%.

Meanwhile, the reissued seven-year bonds to be offered on Tuesday were last auctioned off on June 9, where the government raised only P27.617 billion, below the P30-billion plan. The issue fetched an average rate of 7.307%, above the 7% coupon.

The BTr wants to raise P410 billion from the domestic market in July, or P250 billion via T-bills and P160 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.61 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy