T-bill, bond rates expected to move sideways

Rates of Treasury bills (T-bills) and bonds on offer this week could trade sideways after the Bangko Sentral ng Pilipinas (BSP) signaled the possibility of resuming its tightening cycle.

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 three-year Treasury bonds (T-bonds) with a remaining life of two years and 11 months.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that T-bill and bond yields may decline amid signals from the Bangko Sentral ng Pilipinas (BSP) on a possible policy rate hike in November.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went down by 1.23 bps, 1.97 bps, and 6.76 bps week on week to end at 5.6102%, 5.9444%, and 6.0960%, respectively, based on PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.

The three-year bonds likewise inched down by 1.59 bps to 6.2072% on Friday.

“Trading will likely move sideways until the end of the month. More pain will likely come during the October auctions,” a trader said in an email.

The trader also noted that the reissued three-year bonds might be rejected this week as market players could demand higher rates.

In an interview with Bloomberg TV, BSP Governor Eli M. Remolona said that the central bank may resume monetary tightening at its next meeting on Nov. 16 and hinted at the possibility of future rate hikes.

“It immediately triggered players to unwind positions as it was already an indication that they can hike more after November — beyond what was initially signaled yesterday in the MB (Monetary Board),” the trader said.

The Monetary Board on Thursday maintained its policy rate at 6.25% for a fourth straight meeting, as expected by 14 economists in a BusinessWorld poll last week.

Interest rates on the overnight deposit and lending facilities were also left unchanged at 5.75% and 6.75%, respectively.

From May 2022 to March 2023, the BSP has raised borrowing costs by 425 bps.

Last week, the BTr raised PHP 15 billion as planned via the T-bills as total bids reached PHP 55.665 billion, or more than thrice the amount on offer.

Broken down, the Treasury made a full PHP 5-billion award of the 91-day T-bills as tenders for the tenor reached PHP 16.37 billion. The average rate of the three-month paper went down by 2.3 bps to 5.552%, with accepted rates ranging from 5.53% to 5.568%.

The government also raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 17.792 billion. The average rate for the six-month T-bill was at 5.939%, down by 2.1 bps from the previous week, with accepted rates at 5.9% to 5.953%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt papers as demand for the tenor stood at PHP 21.503 billion. The average rate of the one-year T-bill inched down by 11.7 bps to 6.073%. Accepted yields were from 6.04% to 6.08%.

Meanwhile, the reissued three-year bonds to be offered on Tuesday were last auctioned off on Sept. 5, where the government raised just PHP 21.187 billion of the PHP 30 billion program for a coupon rate of 6.25% and an average rate of 6.222%.

The Treasury 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. — Luisa Maria Jacinta C. Jocson