T-bill, bond rates may be mixed

Rates of Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may end mixed due to expectations of a slight pickup in headline inflation last month.   

The Bureau of the Treasury (BTr) will auction off PHP 20 billion in T-bills on Monday, or PHP 6.5 billion each in 91- and 182-day papers and PHP 7 billion in 364-day debt.

On Tuesday, the government will offer PHP 30 billion in reissued seven-year T-bonds with a remaining life of four years and nine months.

Yields on the T-bills and T-bonds on offer this week could track the mixed movements in secondary market rates on Friday as Philippine headline inflation likely inched up in July, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Secondary market rates consolidated on Friday, a trader said in an e-mail. “Government securities started the day with buying interest but was halted by profit takers continuing to dominate the market.”

The trader expects the five-year bond on offer this week to fetch yields ranging from 6.05% to 6.125%, with demand expected to be strong as the market wants fresh supply of the tenor.

A BusinessWorld poll of 15 analysts conducted last week yielded a median estimate of 4% for the July consumer price index (CPI), matching the lower end of the 4%-4.8% forecast of the Bangko Sentral ng Pilipinas (BSP).

If realized, the July CPI would be faster than 3.7% in June but slower than 4.7% a year earlier. It would mark the eighth straight month that inflation settled within the BSP’s 2-4% target.

The Philippine Statistics Authority will release July inflation data on Tuesday (Aug. 6).

At the secondary market on Friday, yields on the 91-day, 182- day, and 364-day T-bills rose by 5.77 basis points (bps), 2.53 bps, and 0.48 bp week on week to end at 5.7871%, 6.0643%, and 6.1631%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bond declined by 13.26 bps week on week to 6.1162%, while the five-year debt, the tenor closest to the remaining life of the papers to be offered this week, decreased by 11.39 bps to yield 6.0809%.

Last week, the BTr raised PHP 20 billion as planned from the T-bills it auctioned off as total bids reached PHP 35.99 billion, or almost twice the amount on offer.

Broken down, the Treasury borrowed PHP 6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 12.01 billion. The average rate for the three-month papers rose by 3.6 bps to 5.779% from the previous week. Accepted rates ranged from 5.759% to 5.799%.

The government likewise made a full PHP 6.5-billion award of the 182-day securities as bids for the tenor reached PHP 12.12 billion. The average rate for the six-month T-bill stood at 6.014%, up by 2.3 bps week on week, with accepted rates at 5.95% to 6.042%.

Lastly, the Treasury raised the planned PHP 7 billion via the 364-day debt papers as demand totaled PHP 11.86 billion. The average rate of the one-year debt increased by 2.7 bps to 6.108%. Accepted yields were from 6.04% to 6.16%.

Meanwhile, the reissued seven-year T-bonds to be offered on Tuesday were last auctioned off on July 2, where the government raised PHP 30 billion as planned at an average rate of 6.406%, 9.4 bps below the 6.5% coupon rate.

The BTr wants to raise PHP 220 billion from the domestic market this month, or PHP 80 billion through T-bills and PHP 140 billion via T-bonds.

The government borrows to help fund its budget deficit, which is capped at PHP 1.48 trillion this year. — A.M.C. Sy