Higher yields seen on government securities

MANILA, Philippines — Interest rates for government securities are expected to rise next month due to the ongoing taper measures in the US and other countries, according to bond traders.

Bond traders polled by The STAR said they expect rates for Treasury bills (T-bills) to move sideways or rise by as much as five basis points in next week’s auction.

Traders attributed the anticipated jump in rates to the ongoing withdrawal of monetary support in many economies overseas, particularly the US, which slashed its bond purchases by $15 billion for November as a first step of its taper measure.

The US Federal Reserve has started rolling back its monetary support by slashing the monthly volume of its asset purchases. The Fed is eyeing to wrap up the taper by raising interest rates within the first semester of 2022.

“We project yields for T-bills to move sideways or increase by up to five bps. Demand for short-dated securities may pick up now that rates are moving up on threats of interest hikes,” a trader said.

Another trader said the auction for T-bills and Treasury bonds (T-bonds) for December may fetch oversubscribed tenders as investors explore their options on where to invest their liquidity going into the new year.

The Bureau of the Treasury would only auction P30 billion in T-bills and P40 billion in T-bonds, or a total of P70 billion in December, down from P200 billion in November.

“Either way, the auction for T-bills and T-bonds in December will attract oversubscribed demand. Investors will look for channels on where to pour their remaining capital,” another trader said.

National Treasurer Rosalia de Leon said the Treasury would reduce its borrowing program next month to make sure that the government lands within its debt target for 2021.

“The reduction in our December borrowing program will ensure that we remain within our annual borrowing program and maintain our debt-to-GDP at sustainable levels,” De Leon said.