Treasuries and bond rates set to rise further on inflation fears


RATES on government securities should increase this week due to inflationary pressuredamage caused by the Russian invasion of Ukraine.

The Bureau of the Treasury (BTr) will offer 15 billion pesos in treasury bonds (treasury bills) on Monday, or 5 billion pesos each in 91, 182 and 364-day securities.

On Tuesday it will be auctioned off 35 billion pesos in seven-year Treasury bonds (T-bonds) with a remaining life of six years and four months.

A bond trader said via Viber that Treasury yields could rise 5 basis points (bps) this week, while seven-year Treasury yields could range between 5.35% and 5.55 %.

“The Fed rate hike went as planned, but the elephant in the room remains the ongoing conflict between Russia and Ukraine, as this also impacts the domestic market.flation,” the trader said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, in a Viber message, said Treasury yields could continue to rise this week, in line with a weekly rise in the secondary market.

He said that the rate hike fired by the US Federal Reserve last week has already been priced in by the market, as well as Russia’s continued invasion of Ukraine, which has driven up global oil and commodity prices.

The Fed raised rates by a quarter of a percentage point last week, Iffirst time since 2018, to combat rising inflation. He scored six more raises for the remainder of 2022.

World oil prices rose after the Russian invasion of Ukraine on February 24, rising inflconcerns from here and elsewhere.

In the secondary market on Friday, 91-day, 182-day and 364-day Treasury bills were quoted at 1.2005%, 1.4172% and 1.7486%, respectively, based on PHP Bloomberg valuation benchmark rates. published on the Philippine Dealing System website.

Meanwhile, seven-year bonds returned 5.48%.

The government has partially allocated the treasury bills it offLast week, investors demanded higher rates due to rising oil prices and ahead of the Fed’s rate hike. The BTr only raised 9.14 billion pesos via short-term securities or less than the 15 billion pesos programmed even as the offering attracted 23.35 billion pesos in bids.

In detail, the Treasury granted only 3.04 billion pesos in 91-day Treasury bills, even though the total offers reached 8.96 billion pesos for the 5 billion pesos offered. The average three-month Treasury bill rate rose 40.6 basis points to 1.305% from 0.899% at the previous auction.

The BTr also only granted 3 billion pesos in 182-day treasury bills which attracted 7.22 billion pesos in tenders compared to the 5 billion peso program. The tenor reached an average return of 1.458%, up 30.1 basis points from the 1.157% previously seen.

The government also granted a partial allotment of 3.1 billion pesos of the 364-day documents compared to the offer of 5 billion pesos even though the offers totaled 7.17 billion pesos. The average one-year paper yield rose 16.6 basis points to 1.734% from 1.568% previously.

Meanwhile, the last time the government offauctioned the seven-year treasury billsff Tuesday was January 25, when it borrowed 35 billion pesos as planned as total tenders reached 55.62 billion pesos.

The debt securities were allotted at an average rate of 4.689%, up 22.1 basis points from the 4.468% quoted when the series was last allotted on October 26.

BTr plans to raise 250 billion pesos domestically this month, or 75 billion pesos through treasury bills and 175 billion pesos from treasury bonds.

The government is borrowing from local and external sources to help finance a budget deficit capped at 7.7% of gross domestic product this year. — Jenina P. Ibanez

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