RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could rise to track yield movements at the secondary market and amid hawkish signals from officials of the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve.
The Bureau of the Treasury (BTr) will auction off P15 billion in T-bills on Monday, made up of P5 billion each in 91-, 182-, and 364-day papers.
On Tuesday, it will offer P35 billion in reissued 10-year Treasury bonds T-bonds that have a remaining life of nine years and six months.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that T-bill and T-bond rates may follow the rates seen at the secondary market.
“Upcoming Treasury bill auction yields could again be slightly higher, after the slight week-on-week increase in the comparable short-term PHP BVAL (Bloomberg Valuation Service) yields. The upcoming 10-year Treasury bond auction yields could be slightly higher at near the comparable 10-year PHP BVAL yield at 6.36% on Feb. 17,” Mr. Ricafort said.
He said PHP BVAL rates were higher after the BSP’s 50-basis-point (bp) rate hike last week and signals of more increases to come, as well as hawkish hints from officials of the US Federal Reserve.
At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went up by 13.29 bps, 5.58 bps, and 2.31 bps week-on-week to end at 4.4768%, 4.9937%, and 5.3483%, respectively, based on the PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.
The 10-year bond likewise climbed by 13.63 bps week on week to 6.3635%.
The BSP’s policy-setting Monetary Board last week on Thursday hiked benchmark rates by 50 bps for a second straight meeting, and hinted at further increases to help bring down elevated inflation.
The latest move brought the central bank’s policy rate to 6%, the highest in nearly 16 years or since May 2007 when it stood at 7.5%. It has now raised borrowing costs by 400 bps since May 2022.
BSP Governor Felipe M. Medalla last week said a third or maybe fourth rate hike is likely this year, adding they could look at a 25-bp or 50-bp increase at their March 23 meeting.
Meanwhile, Cleveland Fed President J. Loretta Mester and St. Louis Fed President James Bullard both said they would back a 50-bp hike in the next Federal Open Market Committee (FOMC) meeting following stronger-than-expected US consumer inflation data.
The US consumer price index (CPI) increased 0.5% last month after gaining 0.1% in December. In the 12 months through January, the CPI increased 6.4% following a 6.5% rise in December.
The Fed this month hiked its target interest rate by 25 bps to a 4.5%-4.75% range, bringing total increases since March 2022 to 450 bps. Its next policy review is on March 21-22.
“This week’s US data led by PCE (personal consumption expenditure) price indices and FOMC minutes may risk sustaining higher US Treasury rates and stronger dollar and thus, weigh further on risk sentiment,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a report.
“Higher bid-rates for the BTr’s reissuance of its FXTN (fixed-rate Treasury note) 10-69 (10-year) this week could sow the seeds of a steeper curve, although the early yield indication is in the range of 6.20%–6.30%,” Mr. Asuncion added.
Last week, the BTr raised P14.6 billion from its offering of T-bills, lower than the P15-billion program and even as bids reached P32.182 billion, as rates climbed across all tenors.
Broken down, the Treasury raised P5 billion as programmed via the 91-day T-bills, with tenders reaching P8.856 billion. The average rate of the three-month papers inched up by 4.4 bps to 4.23%, with accepted rates ranging from 4.15% to 4.313%.
The government also made a full P5-billion award of the 364-day securities as bids stood at P15.55 billion. The six-month tenor was quoted at an average rate of 5.298%, up by 0.6 bp, with accepted rates at 5.28% to 5.315%.
On the other hand, the BTr borrowed only P4.6 billion from the 182-day debt papers, below the P5-billion program, despite demand for the tenor reaching P7.776 billion. The average rate of the one-year T-bill went up by 8.2 bps to 4.949%. Accepted yields were from 4.91% to 4.975%.
Meanwhile, the reissued 10-year T-bonds to be auctioned off on Tuesday were last offered on Jan. 24, where the government raised the programmed P35 billion, with tenders reaching P93.696 billion. The issue fetched an average rate of 5.913%, with accepted rates at 5.749% to 5.99%.
The Treasury wants to raise P130 billion from the domestic market this month, or P60 billion via T-bills and P70 billion via T-bonds.
The government borrows from domestic and external sources to finance its budget deficit, which is capped at P1.47 trillion this year or 6.1% of gross domestic product. — A.M.C. Sy
