Rates of Treasury bills, bonds seen to track secondary mart

Rates of Treasury bills (T-bills) and bonds (T-bonds) on offer this week could follow the movements of secondary market yields amid hawkish signals from the US Federal Reserve.

The Bureau of the Treasury (BTr) will auction off PHP 15 billion in T-bills on Monday, or PHP 5 billion each in 91-, 182- and 364-day papers.

On Tuesday, it will offer PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and nine months.

Rates on the T-bills could increase, while T-bond yields could dip, following the movements seen at the secondary market due to hawkish signals from the US central bank, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bill rates went up by 1.35 basis points (bps), 6.14 bps, and 0.89 bp week on week to end at 6.1845%, 6.4582%, and 6.5917%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the rate for the 10-year bond dropped by 25.62 bps to end at 6.7416% on Friday.

The Fed kept its benchmark interest rate steady at the 5.25%-5.5% range for a second straight time during its Oct. 31-Nov. 1 meeting.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

The US central bank will next meet on Dec. 12-13 to review policy.

A trader added in an e-mail that the government securities market has been “quiet” since the release of October inflation on Tuesday.

The trader expects the rate for the 10-year bond to range from 6.7% to 6.8%.

Headline inflation for October eased to 4.9% from 6.1% in September and 7.7% in October 2022. This was also below the 5.1-5.9% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.

October inflation was the slowest pace in three months or since the 4.7% in July, but marked the 19^th straight month that inflation breached the central bank’s 2-4% target.

Last week, the government raised PhP 13.22 billion via the T-bills it auctioned off on Monday, short of the PHP 15-billion program, even as total bids reached PHP 32.316 billion or double the amount on offer.

Broken down, the Treasury made a full PHP 5-billion award of the 91-day T-bills, with tenders for the tenor reaching PHP 14.79 billion. The average rate for the three-month paper rose by 0.9 bp to 6.352%. Accepted rates ranged from 6.334% to 6.374%.

Meanwhile, the government borrowed only PHP 4.5 billion through the 182-day securities, short of the PHP 5-billion program, despite bids for the paper reaching PHP 7.176 billion. The average rate for the six-month T-bill stood at 6.536%, up by 7.4 bps, with accepted yields ranging from 6.495% to 6.55%.

The government raised just PHP 3.72 billion via the 364-day debt papers, short of the PHP 5-billion plan, despite bids reaching P10.35 billion. The average rate of the one-year T-bill inched down by 0.1 bp to 6.591%. Accepted yields were from 6.57% to 6.6%.

Meanwhile, the reissued 10-year bonds to be offered on Tuesday were last auctioned off on Oct. 24, where the government raised PHP 30 billion as planned for an average rate of 6.954%.

The government plans to borrow PHP 225 billion from the domestic market this month or PHP 75 billion via T-bills and PHP 150 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — Aaron Michael C. Sy