Rates of T-bills, bonds to track secondary mart

RATES of Treasury bills (T-bills) and bonds (T-bonds) on offer this week could track movements at the secondary market after headline inflation eased in April.

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

On Tuesday, it will offer PHP 25 billion in reissued 10-year T-bonds that have a remaining life of nine years and four months.

T-bill rates could move sideways following slower inflation in April, while the bonds could fetch yields within 5.85-5.95%, at par with secondary market levels, a trader said in a Viber message.

Headline inflation eased to 6.6% in April, the slowest in eight months or since the 6.3% print in August 2022, the Philippine Statistics Authority reported on Friday.

This was likewise below the 7.6% print in March and the 7% median estimate in a BusinessWorld poll and was within the Bangko Sentral ng Pilipinas (BSP) 6.3-7.1% forecast range for the month.

For the first four months, inflation averaged at 7.9%, well above the BSP’s 2-4% target and 6% forecast for the year.

However, better-than expected US employment data released on Friday could pose an upside risk to auction yields, the trader noted.

The US Labor department said on Friday that the unemployment rate fell back to a 53-year low of 3.4%, while nonfarm payrolls also rose by 253,000 jobs last month. Economists polled by Reuters had forecast payrolls would rise by 180,000.

“Upcoming Treasury bill auction yields could again be slightly higher, after the slightly week-on-week rise in the comparable short-term PHP BVAL (Bloomberg Valuation Service) yields by 5-13 basis points (bps), in view of the increase in short-term local interest rate benchmarks since April 2023 towards the local policy rate at 6.25%,” 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-bills went up by 13.32 bps, 4.93 bps, and 5.24 bps week on week to end at ​5.9526%, 6.0613%, and 6.1943% respectively, based on the PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.

The BSP has raised benchmark interest rates by 425 bps since May 2022 to help bring down elevated inflation, with its policy rate now at a 16-year high of 6.25%.

BSP Governor Felipe M. Medalla last month said the Monetary Board could consider holding rates steady at their May 18 meeting if inflation eased further in April.

Meanwhile, T-bond rates could go down to track secondary market levels amid easing inflation, lower global crude oil prices, and a stronger peso exchange rate, Mr. Ricafort added.

At the secondary market, the 10-year bond dropped by 16.80 bps week on week to 5.9366%.

Oil prices fell for the third straight week on Friday, with Brent crude closing USD 2.80 or 3.9% higher at USD 75.30 a barrel, Reuters reported. US West Texas Intermediate settled up USD 2.78 or 4.1% at USD 71.34 after four days of declines that sent the contract to lows last seen in late 2021.

Meanwhile, the local currency closed at PHP 55.30 versus the dollar on Friday, up by five centavos from Thursday’s PHP 55.35 finish, data from the Bankers Association of the Philippines’ website showed.

Week on week, the peso rose by eight centavos from its PHP 55.38 finish on April 28.

Last week, the Treasury raised just PHP 6.915 billion from its offer of T-bills, lower than the PHP 15-billion program, even with total bids reaching PHP 22.123 billion.

Broken down, the Treasury borrowed just PHP 1.915 billion via the 91-day T-bills despite tenders for the tenor reaching PHP 5.075 billion, above the PHP 5-billion plan. The average rate of the three-month papers rose by 13.10 bps to 6%, with the Treasury only accepting bids with this yield.

The government made a full PHP 5-billion award of the 363-day securities, with demand for the tenor reaching PHP 9.888 billion. The one-year paper’s average rate inched up by 3.80 bps to 6.247%, with accepted rates ranging from 6.10% to 6.299%.

Meanwhile, the BTr did not award any 181-day debt papers even as bids for the tenor stood at PHP 7.16 billion, above the PHP 5-billion program. Had the government made a full award, the average rate of the six-month T-bill would have gone up by 23.70 bps to 6.23%, as investors asked for yields ranging from 6.129% to 6.3%.

On the other hand, the reissued 10-year T-bonds to be auctioned off on Tuesday were last offered on April 12, where the government raised PHP 25 billion as planned. The bonds fetched an average rate of 6.142%, with accepted rates at 6.05% to 6.18%.

The Treasury wants to raise PHP 175 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 100 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. — By A.M.C. Sy with Reuters