Rates of Treasury bills and bonds on offer this week could rise after the Bangko Sentral ng Pilipinas (BSP) delivered an off-cycle rate hike last week and amid fears of further tightening next month.
The Bureau of the Treasury (BTr) will auction off PHP 15 billion in Treasury bills (T-bills) on Tuesday, or PHP 5 billion each in 89-, 179- and 362-day papers.
The T-bill tenors were adjusted from the usual 91-, 182- and 364-day maturities due to this week’s holidays.
It will also offer PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of five years and two months.
T-bill and bond yields could inch up after the central bank raised borrowing costs last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Market players will also remain defensive due to the possibility of another rate hike at the BSP’s Nov. 16 meeting, a trader said in an e-mail.
The BSP on Thursday raised benchmark interest rates by 25 basis points (bps) before a scheduled review as it seeks to anchor inflation expectations, bringing its policy rate to 6.5%.
The move came ahead of the Monetary Board’s scheduled meeting on Nov. 16. BSP Governor Eli M. Remolona, Jr. said next month’s review will push through and another rate increase could be on the table as they will have new data to consider by then.
This was the first hike since March and brought total increases since May 2022 to 450 bps. The BSP held rates steady in its last four meetings before the hike.
The trader added that the market will also monitor the BSP’s inflation forecast for October scheduled to be released on Tuesday.
Yields could also be affected by signals from the BSP and US Federal Reserve, a trader said in an e-mail.
The Fed will hold a meeting from Oct. 31 to Nov. 1, where markets expect them to hold rates at 5.25-5.5% but give signals about the future path of monetary policy.
At the secondary market on Monday, the 91-, 182-, and 364-day T-bills went up by 26.2 bps, 6.69 bps, and 31.5 bps week on week to end at 5.9325%, 6.1067%, and 6.2509%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.
The 10-year bond’s rate also rose by 30.86 bps week on week to yield 6.9405%.
Last week, the BTr raised PHP 14.26 billion via the T-bills, just below the PHP 15-billion program, even as total bids reached PHP 23.359 billion.
Broken down, the Treasury borrowed PHP 5 billion as planned via the 91-day T-bills with tenders for the tenor reaching PHP 7.804 billion. The three-month paper was quoted at an average rate of 6.149%, up by 15.9 bps. Accepted rates ranged from 6.04% to 6.249%
The government likewise made a full PHP 5-billion award of the 364-day securities, with bids for the tenor reaching PHP 10.095 billion. The average rate of the one-year T-bill rose by 9.1 bps to 6.479%. Accepted yields were from 6.4% to 6.525%.
On the other hand, the BTr only awarded PHP 4.26 billion in 182-day papers, below the PHP 5-billion plan, despite demand for the tenor reaching PHP 5.46 billion. The average rate for the six-month T-bill rose by 12.3 bps to 6.33%, with accepted yields from 6.245% to 6.399%.
Meanwhile, the reissued 10-year bonds to be offered on Tuesday were last auctioned off on Oct. 10 where the government raised PHP 30 billion as planned. The papers fetched an average rate of 6.512%.
The government plans to borrow PHP 225 billion from the domestic market in November 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. — Luisa Maria Jacinta C. Jocson