T-bill, bond rates likely steady

Rates of Treasury bills (T-bills) and bonds (T-bonds) on offer this week could be broadly steady as investors await the next policy meetings of central banks here and in the United States.

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 25 billion in reissued 10-year T-bonds with a remaining life of four years and nine months.

Rates on the papers may move sideways as investors expect the US Federal Reserve to pause its tightening cycle this month, which could be matched by the Bangko Sentral ng Pilipinas (BSP) in its own review, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The larger market risk is whether the BSP will match the upcoming Fed rate hike of 25 bps (basis points) if the latter event materializes,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a report.

The US central bank raised borrowing costs by 25 bps for a 10^th straight time at its May 2-3 meeting, bringing the Fed funds rate to 5% to 5.25%.

The Fed has hiked borrowing costs by 500 bps since March 2022.

Its next policy meeting is on June 13-14.

Meanwhile, the BSP on May 18 paused its tightening cycle, keeping its policy rate unchanged at 6.25% for the first time after nine meetings.

Since it began its aggressive monetary tightening cycle in May 2022, the central bank had raised borrowing costs by 425 bps.

The Monetary Board will next meet to review policy on June 22.

T-bill rates could also track the week-on-week declines seen at the secondary market after the BSP on Friday said it would start offering 56-day bills on June 30, which could siphon off some of the excess liquidity from the financial system, Mr. Ricafort added.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went up by 2.43 basis points (bps), 9.98 bps, and 3.53 bps week on week to end at 5.7657%, 5.963%, and 5.9314%, respectively, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the five-year tenor, the benchmark closest to the remaining life of the bonds on offer on Tuesday, inched down by 2.09 bps week on week to 5.7394%. The 10-year bond’s rate likewise went down by 10.22 bps week on week to end at 5.8375% on Friday.

Last week, the BTr raised PHP 15 billion as planned from the T-bills as the offer was more than thrice oversubscribed, with total bids reaching PHP 48.726 billion.

Broken down, the Treasury borrowed PHP 5 billion as programmed via the 91-day T-bills, with tenders reaching PHP 13.68 billion. The average rate of the three-month papers inched up by 0.6 bp to 5.783%, with accepted rates ranging from 5.688% to 5.799%.

The government likewise made a full PHP 5-billion award of the 182-day securities as bids for the tenor reached PHP 16.53 billion. The six-month T-bill was quoted at an average rate of 5.879%, down by 1.9 bps from the previous week, with accepted rates from 5.748% to 5.9%.

Lastly, the BTr raised the planned PHP 5 billion from the 364-day debt papers as demand reached by PHP 18.516 billion. The average rate of the one-year T-bill climbed 0.3 bp to 5.948%. Accepted yields were from 5.813% to 5.975%.

Meanwhile, the reissued 10-year T-bonds to be auctioned off on Tuesday were last offered on Dec. 4, 2018, where the government raised P38.136 billion. The papers were awarded at an average rate of 6.975%.

The Treasury wants to raise PHP 185 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 125 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. — By A.M.C. Sy