Rates of T-bills, bonds may end mixed

Rates of Treasury bills and bonds on offer this week could track the mixed movements in secondary market yields amid expectations that central banks could begin their easing cycles this year.

The government 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 three-year Treasury bonds (T-bonds).

T-bill rates may track the mixed movements of comparable secondary market yields as the Bangko Sentral ng Pilipinas (BSP) remains hawkish while the US Federal Reserve is widely expected to begin cutting rates this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the rates of the 91- and 364-day Treasury bills (T-bills) rose by 8.59 basis points (bps) and 4.56 bps week on week to 5.2438% and 5.8674%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the 182-day T-bill fell by 0.55 bp to yield 5.5178%.

BSP Governor Eli M. Remolona, Jr. last month said the central bank is unlikely to cut benchmark interest rates in the next few months and is leaning towards keeping borrowing costs higher for longer.

The BSP will only begin policy easing if inflation settles within a “comfortable” range or the midpoint of its 2-4% target band, Mr. Remolona said.

The central bank raised borrowing costs by a cumulative 450 bps from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

Meanwhile, the US central bank last month kept the fed funds rate unchanged at 5.25-5.5% for the third straight time after it hiked borrowing costs by 525 bps from March 2022 to July 2023.

Markets expect the Fed to start monetary easing as early as March and cut rates by up to 150 bps this year.

On the other hand, the three-year T-bond could fetch rates of 5.75-5.875% as the market awaits the release of December inflation data, a trader said in an e-mail.

At the secondary market, the three-year paper saw its yield go down by 1.52 bps week on week to 5.9203%, BVAL data showed.

Headline inflation likely settled within 3.6%-4.4% in December, the BSP said last week.

If realized, the upper end of the forecast would be faster than the 4.1% print in November but slower than the 8.1% seen a year ago.

Meanwhile, the lower end would be the slowest pace and the first time the monthly print would be within the BSP’s 2-4% target range since February 2022’s 3%.

The Philippine Statistics Authority will release December consumer price index data on Friday.

The BTr wants to raise PHP 195 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 120 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year. — A.M.C. Sy