Rates of T-bills, bonds may drop further

RATES of Treasury bills and bonds on offer this week could continue to decline to track secondary market levels ahead of the policy meetings of central banks in advanced economies.

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

On Wednesday, it will offer P30 billion in fresh seven-year Treasury bonds (T-bonds).

T-bill and T-bond rates may track secondary market yields ahead of an expected rate hike by the US Federal Reserve this week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Mr. Ricafort added that the market will monitor Fed Chair Jerome H. Powell’s press conference after the policy meeting for possible signals about the central bank’s next move.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went down by 17.13 basis points (bps), 13.46 bps, and 3.38 bps week on week to end at 5.808%, 5.9565%, and 6.1451%, respectively, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the seven-year T-bonds inched down by 2.52 bps week on week to yield 6.2462%.

“[This] week will be all about central bank meetings with the Fed on Wednesday, ECB (European Central Bank) on Thursday and BoJ (Bank of Japan) on Friday,” a trader said in an e-mail, adding that the T-bonds on offer could fetch a yield of 6.375%.

The Fed will raise its benchmark overnight interest rate by 25 bps to the 5.25%-5.5% range on July 26, according to all 106 economists polled by Reuters, with a majority still saying that will be the last increase of the current tightening cycle.

The US central bank paused its tightening cycle in June after hiking its benchmark rate by a cumulative 500 bps to a range between 5% and 5.25%.

Last week, the BTr raised PHP 15 billion as planned via the T-bills it auctioned off as total bids reached PHP 44.748 billion, or nearly thrice the amount on the auction block.

Broken down, the Treasury made a full PHP 5-billion award of the 91-day T-bills as tenders for the tenor reached PHP 17.716 billion. The average rate for the three-month papers went down by 8.9 bps to 5.884% with accepted rates ranging from 5.86% to 5.9%.

The government also raised PHP 5 billion as planned from the 182-day securities as bids stood at PHP 14.31 billion. The average rate for the six-month T-bill was at 6.095, lower by 17.1 bps from the previous week, with accepted rates from 6.09% to 6.11%.

The BTr likewise borrowed PHP 5 billion as programmed via the 364-day debt papers as demand reached PHP 12.732 billion. The average rate of the one-year T-bill went down by 11.3 bps to 6.226%. Accepted yields were from 6.098% to 6.3%.

The Treasury wants to raise PHP 180 billion from the domestic market this month, or PHP 60 billion via 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 6.1% of gross domestic product this year. — A.M.C. Sy with Reuters