Rates of Treasury bills, bonds may go up

Rates of the Treasury bills and bonds on offer this week could rise to track secondary market levels due to hawkish signals from the US Federal Reserve.

The Bureau of the Treasury (BTr) will auction off PHP 15 billion in Treasury bills (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 10-year Treasury bonds (T-bonds) with a remaining life of nine years and two months.

T-bill and T-bond rates may track the rise in secondary market yields last week following hawkish comments from the Fed chief, 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-bills went up by 2.27 basis points (bps), 8.57 bps, and 8.74 bps week on week to end at 6.1113%, 6.1815%, and 6.2175%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the yield on the 10-year papers rose by 11.6 bps week on week to end at 6.3036% on Friday.

US central bankers are likely to resume their rate hike campaign after a break last month, Fed Chair Jerome H. Powell signaled on Thursday, as a fresh slew of stronger-than-expected US economic data underscored why more monetary tightening is likely needed, Reuters reported.

“We did take one meeting where we didn’t move,” Mr. Powell said during an event held by the Spanish central bank in Madrid. “We expect the moderate pace of interest rate decisions to continue.”

The US central bank last month paused its tightening cycle after hiking rates for 10 straight meetings by a total of 500 bps to a range between 5% and 5.25%.

The US central bank’s next policy meeting is on July 25-26.

“[This] week’s 9-year auction has a tendency to be rejected as players will likely stay out or bid at ridiculous levels of 6.6% to 6.75%. Expect quiet trading [this] week with some relief on June disinflation due on Wednesday where the BSP (Bangko Sentral ng Pilipinas) projected it to slow down between 5.3% and 6.1%,” a trader said in an e-mail.

A BusinessWorld poll of 17 analysts yielded a median estimate of 5.5% for June headline inflation, near the lower end of the central bank’s forecast.

If realized, this would be below the 6.1% in May and would mark the fifth straight month of slower inflation.

However, June would be the 15^th straight month that inflation surpassed the BSP’s 2-4% target range.

The Philippine Statistics Authority will release June inflation data on Wednesday.

Last week, the BTr raised just PHP 10.581 billion via the T-bills it auctioned off versus the PHP 15-billion program, even as total bids reached PHP 17.648 billion.

Broken down, the Treasury raised PHP 5 billion as planned via the 92-day T-bills as tenders for the tenor reached PHP 6.677 billion. The average rate of the three-month papers went up by 5.7 bps to 6.086%, with accepted rates ranging from 5.98% to 6.199%.

Meanwhile, the government made a partial PHP 2.97-billion award of the 183-day securities versus the PHP 5-billion program as bids for the tenor reached just PHP 4.98 billion. The six-month T-bill was quoted at an average rate of 6.144%, up by 6.3 bps, with accepted rates from 6.02% to 6.2%.

Lastly, the BTr raised just PHP 2.611 billion from the 365-day debt papers out of the PHP 5 billion on the auction block, even as demand reached PHP 5.911 billion. The average rate of the one-year T-bills rose by 5.3 bps to 6.219% Accepted yields were from 6.11% to 6.25%.

The T-bill tenors offered last week were adjusted from the usual 91-, 182- and 364-day papers due to a holiday.

Meanwhile, the reissued 10-year T-bonds to be auctioned off on Tuesday were last offered on June 27, where the government raised PHP 25 billion as planned. The papers were awarded at an average rate of 6.243%.

The BTr 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 with Reuters