Rates of Treasury bills, bonds likely to decline

Rates of Treasury bills (T-bills) and bonds on offer this week could track secondary market movements after faster-than-expected inflation last month.

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 seven-year Treasury bonds (T-bonds) with a remaining life of six years and 10 months.

“The upcoming Treasury bill auction yields could again decline week on week, after the comparable short-term PHP BVAL (Bloomberg Valuation Service) yields were lower by up to 0.05-0.07 basis point (bp) week on week,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The upcoming seven-year Treasury bond auction yield could be similar to the comparable seven-year PHP BVAL yield at 6.42% as of Sept. 8,” Mr. Ricafort added.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went down by 5.28 bps, 0.11 bp, and 7.02 bps week on week to end at 5.6553%, 5.9867%, and 6.193% respectively, based on PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.

The seven-year bond likewise dropped by 12.89 bps week on week to end at 6.4154% on Friday.

“The seven-year bond auction should see a range of 6.35-6.45%, and is a good measure of risk appetite given the current backdrop of high inflation,” a trader said in an e-mail.

Headline inflation picked up to a two-month high of 5.3% in August from 4.7% in July, data released by the Philippine Statistics Authority last week showed.

Still, this was below the 6.3% print in August 2022, and was within the 4.8-5.6% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.

However, this was above the 4.9% median estimate in a BusinessWorld poll of 18 analysts.

August also marked the 17^th consecutive month that the consumer price index (CPI) was above the BSP’s 2-4% target for the year.

For the first eight months, the CPI averaged 6.6%, above the central bank’s full-year forecast of 5.6%.

Last week, the BTr raised PHP 15 billion as planned via the T-bills it auctioned off on Monday as total bids reached PHP 47.56 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 as tenders for the tenor reached PHP 13.242 billion. The average rate of the three-month paper went down by 2.1 bps for an average rate of 5.552%, with accepted rates ranging from 5.5% to 5.6%.

The government also raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 15.043 billion. The average rate for the six-month T-bill was at 5.966%, down by 2.7 bps, with accepted rates at 5.948% to 5.985%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt papers as demand for the tenor stood at PHP 19.275 billion. The average rate of the one-year T-bill declined by 9.9 bps to 6.198%. Accepted yields were from 6.17% to 6.22%.

Meanwhile, the reissued seven-year bonds to be offered on Tuesday were first auctioned off on July 26, where the government raised PHP 24.793 billion, short of the PHP 30-billion program, at a coupon rate of 6.375% and an average rate of 6.328%.

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