T-bill, bond rates may be mixed before BSP meet

Rates of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week may end mixed ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting.

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 20-year T-bonds with a remaining life of 19 years and 11 months.

Rates of T-bills and T-bonds to be auctioned off this week could track the mixed movements in secondary market yields last week amid policy signals from local monetary authorities, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The market is also anticipating the next BSP rate-setting meeting on Thursday, June 27,” Mr. Ricafort added.

At the secondary market on Friday, yields on the 91-day and 364-day T-bills went up by 3.29 basis points (bps) and 1.18 bps week on week to end at 5.6998% and 6.0896%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website. Meanwhile, the 182-day paper’s rate went down by 2.31 bps to 5.9463%.

On the other hand, the 20-year bond’s yield rose by 1.76 bps week on week to 6.8316%.

The BSP is widely expected to maintain its policy stance for a sixth straight meeting on Thursday amid persistent risks to the inflation outlook and a weak peso, analysts said.

All 15 analysts in a BusinessWorld poll conducted last week expect the Monetary Board to maintain its target reverse repurchase rate at a 17-year high of 6.5% at its policy meeting on Thursday.

The reissued 20-year bonds on offer this week could see “weak” demand and fetch yields ranging from 6.8%-6.95%, which could lead to a partial award, a trader said in an e-mail.

“We expect most investors to remain cautious while awaiting BTr’s borrowing schedule for the next quarter,” the trader added.

Last week, the government raised PHP 15 billion as planned from the T-bills it offered as total bids reached PHP 40.282 billion, or almost thrice the amount on the auction block.

Broken down, the BTr borrowed PHP 5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 17.18 billion. The average rate for the three-month paper inched down by 0.1 bp to 5.666% from the previous week. Accepted rates ranged from 5.645% to 5.674%.

The government likewise made a full PHP 5-billion award of the 182-day securities, with bids reaching PHP 12.56 billion. The average rate for the six-month T-bill stood at 5.914%, inching up by 0.6 bp, with accepted rates at 5.898% to 5.925%.

Lastly, the Treasury raised the planned PHP 5 billion via the 364-day debt papers as demand for the tenor totaled PHP 12.465 billion. The average rate of the one-year debt went up by 0.7 bp to 6.046%. Accepted yields were from 6.035% to 6.055%.

Meanwhile, the reissued 20-year bonds to be auctioned off on Tuesday were last offered on May 21, where the government raised just PHP 22.717 billion out of the PHP 30 billion placed on the auction block. The bonds were awarded at an average rate of 6.797%, 7.8 bps above the 6.875% coupon for the series.

The BTr wants to raise PHP 180 billion from the domestic market this month, or PHP 60 billion from T-bills and PHP 120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy