Rates of Treasury bills, bonds may climb

Yields on Treasury bills (T-bills) and Treasury bonds (T-bonds) to be offered this week could rise after the Bangko Sentral ng Pilipinas (BSP) resumed its tightening cycle and ahead of the release of October consumer price index (CPI) data.

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 eight months.

T-bill and T-bond rates may track the increases seen in secondary market yields after the BSP raised borrowing costs in an off-cycle move last month, 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-bill rates went up by 6.43 basis points (bps), 14.59 bps, and 7.7 bps week on week to end at 6.171%, 6.3968%, and 6.5828%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

The seven-year bond saw its yield rise by 5.84 bps week on week to 6.9131%.

The BSP on Oct. 26 delivered an off-cycle 25-bp hike due to growing inflationary pressures, bringing its policy rate to a 16-year high of 6.5%.

The increase came ahead of the Monetary Board’s scheduled meeting on Nov. 16.

Since May 2022, the central bank has hiked its key rate by a cumulative 450 bps.

Meanwhile, the yield of the seven-year T-bond may range from 6.9% to 7.05%, a trader said in an e-mail.

Investors are awaiting the release of October inflation data on Tuesday as this could affect the BSP’s policy decision this month, the trader said.

A BusinessWorld poll of 13 analysts conducted last week yielded a median estimate of 5.7% for October inflation.

If realized, this would mark the 19^th straight month that the CPI exceeded the BSP’s 2-4% target but would be within the BSP’s 5.1-5.9% forecast for the month.

This would be below the 6.1% print in September and 7.7% in the same month last year and be the slowest in two months or since the 5.3% in August.

Last week, the BTr raised just PHP 12.75 billion via the T-bills it auctioned off on Tuesday, short of the PHP 15-billion program, even as total bids for the offer reached PHP 21.941 billion.

Broken down, the Treasury made a full PHP 5-billion award of the 89-day T-bills, with tenders for the tenor reaching PHP 7.836 billion. The average rate of the three-month paper rose by 198.4 bps to 6.343%. Accepted rates ranged from 6.185% to 6.42%.

Meanwhile, the government borrowed only PHP 3.96 billion through the 179-day securities, short of the PHP 5-billion program, despite bids for the paper reaching PHp 6.41 billion. The average rate for the six-month T-bill stood at 6.462%, up by 13.2 bps, with accepted yields ranging from 6.399% to 6.5%.

The government raised just PHp 3.8 billion via the 362-day debt papers, short of the P5-billion plan, despite bids reaching PHP 7.695 billion. The average rate of the one-year T-bill rose by 11.3 bps to 6.592%. Accepted yields were from 6.55% to 6.6%.

The T-bill tenors were adjusted from the usual 91-, 182- and 364-day maturities due to holidays last week.

Meanwhile, the reissued seven-year bonds to be offered on Tuesday were last auctioned off on Oct. 17, where the government raised P30 billion as planned. The papers fetched an average rate of 6.675%.

The government plans to borrow PHP 225 billion from the domestic market this month or PHP 75 billion via T-bills and PHP 150 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