Rates of T-bills, bonds may end lower

Rates of Treasury bills and bonds on offer this week could decline to track secondary market movements, driven by the peso’s appreciation against the dollar and easing global oil prices.

The government will auction off PHP 10 billion in Treasury bills (T-bills) on Tuesday or PHP 3 billion each in 91- and 182-day papers and PHP 4 billion in 364-day papers.

On Wednesday, it will offer PHP 20 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of five years and 10 months.

T-bill and bond yields may track the rally seen at the secondary market last week amid a stronger peso, which could reduce importation prices and overall inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Global crude oil prices reached four-month lows last week, which could help alleviate inflationary pressures, causing yields to decline, Mr. Ricafort said.

“The trading week will feature a bond auction with indications of 6.15-6.25%. We think this will be well received as we suspect bond supply in December to be meager,” a trader added in an e-mail.

On Friday, the peso closed at PHP 55.38 against the greenback, appreciating by one centavo from the PHP 55.39 finish on Thursday.

This was the local currency’s strongest close versus the dollar in over three months or since it ended at PHP 55.19 on Aug. 2.

Meanwhile, Brent crude futures settled down 84 cents or 1% at USD 80.58 a barrel on Friday, while US West Texas Intermediate crude fell USD 1.56 or 2% from Wednesday’s close to USD 75.54, Reuters reported.

At the secondary market on Friday, rates of the 91-, 182-, and 364-day T-bills went down by 40.24 basis points (bps), 36.34 bps, and 22.22 bps week on week to end at 5.7399%, 5.9376%, and 6.2694%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data published on the Philippine Dealing System’s website.

Yields on the seven-year and five-year bonds also declined by 15.11 bps and 12.72 bps week on week to end at 6.2715% and 6.242%, respectively.

“The PHP BVAL yields mostly continued to ease despite some hawkish signals from local monetary authorities to ensure inflation is anchored towards the Bangko Sentral ng Pilipinas’ (BSP) targets,” Mr. Ricafort added.

BSP Governor Eli M. Remolona, Jr. on Friday said monetary policy will remain “hawkish for a while,” reiterating that the Monetary Board could still resume tightening if inflation picks up anew.

At its Nov. 16 policy meeting, the BSP kept its target reverse repurchase rate at a 16-year high of 6.5% amid easing inflationary pressures following an off-cycle hike of 25 bps last month.

The Monetary Board has now raised borrowing costs by a total of 450 bps since it started its tightening cycle in May 2022.

It will hold its final policy meeting for this year on Dec. 14.

Headline inflation eased to 4.9% in October from 6.1% in September. This brought the 10-month average to 6.4%, still above the BSP’s 2-4% target and 6% forecast for the year.

The Bureau of the Treasury (BTr) did not auction off T-bills last week to make way for its maiden offering of one-year tokenized bonds, from which it raised PHP 15 billion at a coupon rate of 6.5%.

At its last offering of T-bills on Nov. 13, the government raised PHP 15 billion as planned via the short-term papers as total bids reached PHP 46.441 billion or more than thrice 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 20.133 billion. The average rate of the three-month paper fell by 22.9 bps to 6.123%. Accepted rates ranged from 6.024% to 6.197%.

The government likewise borrowed the programmed P5 billion from the 182-day securities, as bids for the paper reached PHP 10.732 billion. The average rate for the six-month T-bill stood at 6.513%, down by 2.3 bps, with accepted yields ranging from 6.45% to 6.549%.

The government also raised PHP 5 billion as planned via the 364-day debt papers, with bids reaching PHP 15.576 billion. The average rate of the one-year T-bill went down by 3.1 bps to 6.56%. Accepted yields were from 6.54% to 6.585%.

On the other hand, the seven-year bonds to be offered on Wednesday were last auctioned off on Aug. 8, where the government raised PHP 23.629 billion, below PHP 30 billion on the auction block, at an average rate of 6.468%. Accepted yields ranged from 6.378% to 6.5%.

The BTr wants to raise PHP 150 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 90 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. — Luisa Maria Jacinta C. Jocson with Reuters