Rates of Treasury bills, bonds may decline on CPI, GDP data

Rates of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week may end mostly lower following the release of key Philippine economic data.

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

On Tuesday, it will offer PHP 30 billion in reissued 20-year T-bonds with a remaining life of 14 years and eight months.

T-bill and T-bond rates could track the mixed movements in secondary market yields following the release of Philippine inflation and gross domestic product (GDP) data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the 91 and 182-day T-bills went down by 7.59 basis points (bps) and 2.28 bps week on week to end at 5.7818% and 5.9081%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website. Meanwhile, the 364-day T-bill went up by 1.09 bps to end at 6.0751%.

For its part, the 20-year bond’s yield dropped by 7.77 bps week on week to close at 6.9054%.

Headline inflation picked up for a third straight month to 3.8% year on year in April amid higher food and transport costs from 3.7% in March.

This was slower than the 6.6% print in the same month a year a prior. It was within the Bangko Sentral ng Pilipinas’ (BSP) 3.5-4.3% forecast for the April consumer price index (CPI) and marked the fifth straight month that inflation settled within the central bank’s 2-4% annual target range.

The April CPI was also below the 4.1% median estimate in a BusinessWorld poll of 16 analysts.

For the first four months, headline inflation averaged 3.4%, below the BSP’s 3.8% full-year forecast.

Meanwhile, Philippine GDP expanded by 5.7% in the first quarter, faster than the 5.5% expansion logged in October-December 2023.

However, this was slower than the 6.4% growth seen in the first quarter of 2023 and was below the 5.9% median forecast of 20 economists in a BusinessWorld poll.

This also fell short of the government’s 6-7% full-year GDP growth target.

Yields on the 20-year T-bond to be auctioned this week could range from 6.85% to 6.95% on expectations of slower US CPI last month, a trader said in an e-mail.

April US consumer inflation data will be released on May 15, Wednesday.

Last week, the Treasury raised PHP 15 billion as planned from the T-bills as total bids reached PHP 52.947 billion, or over thrice the amount on the auction block.

Broken down, the BTr borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 19.037 billion. The average rate for three-month paper went down by 8.9 bps week on week to 5.78%. Accepted rates ranged from 5.77% to 5.79%.

The government likewise made a full PHP 5-billion award of the 182-day securities, with bids reaching PHP 16.31 billion. The average rate for the six-month T-bill stood at 5.93%, down by 5.8 bps, with accepted rates at 5.893% to 5.954%.

Lastly, the Treasury raised PHP 5 billion as planned via the 364-day debt papers as demand for the tenor totaled PHP 17.6 billion. The average rate of the one-year debt dropped by 2.5 bps to 6.056%. Accepted yields were from 6% to 6.065%.

Meanwhile, the reissued 20-year bonds to be auctioned off on Tuesday were last offered on April 16, where the government did not accept any bids. The last successful award of the issue was on Nov. 21, 2023, where the government raised PHP 20 billion as planned from the papers at an average rate of 6.593%, 15.7 bps below the 6.75% coupon for the series.

The BTr wants to raise PHP 210 billion from the domestic market this month, or PHP 60 billion from 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 PHP 1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy