Higher demand expected in government securities auction

MANILA, Philippines — Investors are expected to swarm next week’s auctions with demand largely focused on short-dated securities and retail Treasury bonds (RTBs).

Bond traders told The STAR that the Bureau of the Treasury (BTr) should anticipate increased demand for Treasury bills (T-bills)  in next week’s  auction.

They said yields for T-bills may move sideways to end a three-week upward streak,   which they attributed to the scheduled sale of RTBs until Nov. 26.

“We expect yields for T-bills to move sideways. T-bills rates went up across the board in the past weeks in anticipation of the issuance of retail Treasury bonds,” a trader said.

“Also, investors have yet to lay off their fears on inflation. We need to see them believe the Bangko Sentral ng Pilipinas  that price pressures are transitory before they steady their asking rates when purchasing government securities,” the trader added.

Last week, yields for T-bills went up across all tenors for a third consecutive week, increasing by 0.7 basis point to 1.15 percent for 91 days; by 1.2 bps to 1.413 percent for 182 days; and by 0.5 bp to 1.621 percent for 364 days.

National Treasurer Rosalia de Leon said the period for accommodative policies could soon come to a close with the recovery of economies from the pandemic, proof of which the US Federal Reserve has started cutting its monetary support by bringing down bond purchases by $15 billion this month.

Another trader said demand for the RTBs may rise in the days leading to the cutoff, as investors  look for channels where they can pour their liquidity before the year ends.

Last week, the Treasury sold an initial P113.545 billion for the 26th offering of RTBs. The amount exceeded the P30 billion program by almost quadruple, as demand for the debt papers was oversubscribed by 5.5 times at P165.033 billion.

The RTBs maturing in 2027 quoted yields at 4.564 percent and a coupon of 4.625 percent. The securities can be bought by investors for as low as P5,000 per bid.

According to the Treasury, proceeds from the RTB offering will go to the government’s budget to expand its resources in managing the pandemic.

As such, the Treasury placed no cap on how much it will raise through the public sale and swap offer of the RTBs.