Rates of Treasury bills, bonds may end mixed amid BSP bets

Rates of Treasury bills (T-bills) and Treasury bonds (T-bonds) could end mixed this week on bets that the Bangko Sentral ng Pilipinas (BSP) may keep rates higher for longer.

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 T-bonds with a remaining life of six years and four months.

T-bill and T-bond rates may track the mixed movements in secondary market yields last week after Finance Secretary Ralph G. Recto, a member of the BSP’s policy-setting Monetary Board, said the central bank may cut rates just two times instead of the planned four, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the rates of the 91-day and 364-day T-bills rose by 0.16 basis point (bp) and 4.5 bps week on week to end at 5.7745% and 6.0645%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website. Meanwhile, the 182-day T-bill went down by 3.91 bps to end at 5.9187%.

On the other hand, the seven-year bond went down by 1.06 bps week on week to 6.2017%.

Mr. Recto said on Thursday interest rates may stay “higher for longer,” but could see the first cut this year, Reuters reported.

He added that the expected rate cut could be “less than previously thought” in terms of magnitude and frequency. He said interest rates could be cut by up to 200 bps in the next two years.

The BSP kept its policy rate steady at a near 17-year high of 6.50% for a third straight meeting in February.

The Monetary Board will next meet to review its policy settings on April 8. Next month’s meeting was originally scheduled on April 4.

Meanwhile, a trader said in an e-mail that the T-bonds on offer this week may fetch a rate between 6.15% and 6.225% ahead of the release of the BTr’s second quarter borrowing plan.

The BTr has raised PHP 467.3 billion so far out of its PHP 525-billion borrowing plan for the first quarter.

Last week, the BTr borrowed PHP 15 billion as planned from its offering of T-bills as total bids reached PHP 47.245 billion or more than thrice the amount on the auction block.

Broken down, the Treasury raised PHP 5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 14.21 billion. The average rate for the three-month paper went down by 2.8 bps to 5.744%. Accepted rates ranged from 5.68% to 5.8%.

The government likewise made a full PHP 5-billion award of the 182-day securities as bids for the tenor reaching PHP 12.67 billion. The average rate for the six-month T-bill stood at 5.916%, down by 5 bps, with accepted rates at 5.855% to 5.98%.

Lastly, the BTr borrowed PHP 5 billion as planned via the 364-day debt papers as demand totaled PHP 20.365 billion. The average rate of the one-year T-bill went down by 5.4 bps to 6.033%. Accepted yields were from 6.023% to 6.043%.

Meanwhile, the reissued T-bonds to be offered on Tuesday were last auctioned off on Nov. 7, 2023, where the government raised PHP 30 billion as planned at an average rate of 6.807%.

The BTr is looking to raise PHP 180 billion from the domestic market this month, or PHP 60 billion from 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 5.1% of gross domestic product this year. — A.M.C. Sy with Reuters