Rates for government securities seen to drop

MANILA, Philippines — Rates for government securities are expected to be on a downtrend after debt watcher Fitch Ratings upgraded the credit rating outlook of the Philippines as the economy recovers from the pandemic.

National treasurer Rosalia de Leon said yields for both short- and long-term government securities may ease moving forward.

“We see rates declining as a result of both Fitch outlook adjustment to stable and MB (Monetary Board) pause on policy rates last week,” De Leon told reporters.

Fitch recently retained the country’s credit rating at BBB or a notch above minimum investment grade.

A stable outlook means the rating is likely to stay over the medium term of 12 to 18 months.

De Leon, however, said it is “hard to attribute” the kind of savings that the government would get following the stable outlook.

“We will have to also see whether the Fed will start to pause when they meet in June,” De Leon said.

The Fitch rating came a week after the central bank finally took a pause in its tightening cycle, resulting in lower yields for government securities.

Meanwhile, the Treasury managed to raise the full P100 billion in long-term T-bonds that it set for the month of May.

The Treasury yesterday fully awarded P25 billion for the reissued seven-year T-bond with a remaining life of six years and 11 months. This is the last T-bond auction for the month.

This brought the total T-bonds raised to P100 billion for May, allowing the Treasury to meet its target.

During yesterday’s auction, the seven-year T-bonds fetched an average rate of 5.774 percent, moving upward by 9.3 basis points from the 5.681 percent BVAL Reference Rate, which is the standard for securities.

Rates went from a low of 5.648 percent and a high of 5.85 percent.

Yesterday’s average rate was also lower than the six percent coupon rate when the T-bonds were first issued last month.

Likewise, the yield was below the 6.012 percent rate during the previous seven-year T-bond auction on April 25.

At the time, the government also raised its target offer of P25 billion.

Demand for yesterday’s securities attracted P30.625 billion bids, oversubscribing the auction by 1.23 times.

However, bids dropped 50 percent from the last seven-year auction where offers reached P61.85 billion.

The latest offering has a maturity date of April 27, 2030