Government securities’ yields expected to rise

MANILA, Philippines — Debt papers to be issued by the government this week will likely fetch higher rates anew as buyers continue to look for additional protection on their investments amid risks arising from the peso’s devaluation and the country’s scaled down credit ratings.

The Bureau of the Treasury will auction off P15 billion worth of Treasury bills (T-bills) today and another P35 billion through the issuance of a reissued seven-year Treasury bond (T-bond) tomorrow.

Bond traders told The STAR they expect T-bill rates to increase by an average of five basis points as investors seek extra security in the face of a decline in the peso’s value. On the other hand, the T-bond rate is seen to settle between 3.650 percent and 3.700 percent.

“Investors this week will look at the direction of the peso-dollar exchange. For the past weeks, we saw some trend in the exchange where the peso’s value is falling,” a trader said.

The peso on Friday weakened to 50.34 against the dollar from 50.135 on Thursday, based on data from the Bankers Association of the Philippines.

Another trader said investors would swarm the auction to take advantage of rising yields as the threat of a credit rating downgrade would also push rates upward.

“There is also a risk of a credit rating downgrade that there will be an upward bias for the rates in the auction to go up this week,” the trader said.

Last week, the Treasury sold P15 billion in T-bills in an auction that was oversubscribed by more than three times, with bids totaling P45.740 billion. The 91-day securities fetched a rate of 1.082 percent; the 182-day, 1.401 percent, and the 364-day, 1.629 percent.

Also, the Treasury awarded in full P35 billion in original issue of 10-year

T-bonds. The securities fetched a rate of 3.920 percent, as well as a coupon of four percent.

Bond traders said the next auctions may be influenced by the results of the scheduled meeting of the US Federal Open Market Committee on July 27 and 28.

Similarly, they warned that investors may stay off the auctions, or demand increased rates, if the government fails to address the spread of the COVID Delta variant here.