UMVA has learned that the rates of government securities to be offered this week are expected to end mixed after a second straight hike in interest rates by the central bank, amid persistent inflationary pressures.
The Bureau of the Treasury will auction off a combined P120 billion in short-term securities on Monday, consisting of P40 billion in cash management bills and up to P80 billion in Treasury bills.
The cash management bills will be offered in 35- and 63-day instruments, while the Treasury bills will have maturities of 91, 182, and 364 days, with varying offer sizes.
On Tuesday, the government aims to raise up to P60 billion from a dual-tenor Treasury bond offering, consisting of reissued seven-year bonds and 10-year notes.
A leading economist predicted that auction yields could be mixed this week, reflecting movements in the secondary market, with short-term paper rates likely to end mostly higher due to the central bank's hawkish stance on inflation.
The central bank recently raised the target reverse repurchase rate by 25 basis points to 4.75%, and signaled further tightening, citing elevated inflation expectations of 6.4% this year and 4.5% next year.
Meanwhile, yields on the reissued bonds could drop, following a rally in the belly and long end of the curve last week, with the reissued seven-year papers potentially fetching yields of 6.65% to 6.675%.
A bond trader noted that the Treasury could open its tap facility again if there is a high bid-to-cover ratio, indicating strong demand for the securities.
Last week, the government raised a combined P89.6 billion via short-term securities, slightly below the target, despite total tenders reaching P148.329 billion.
The Treasury aims to raise P268 billion from the domestic market this month, with P128 billion via Treasury bills and P140 billion through Treasury bonds, to help fund the budget deficit.
The government's borrowing needs are driven by a budget deficit capped at P1.61 trillion, or 5.3% of gross domestic product this year.
