T-bill, bond rates may be mixed ahead of CPI data

Rates of Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week could be mixed as the market awaits the release of March inflation data.

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 nine months.

The seven-year bonds may fetch rates from 6.2% to 6.275% amid “decent demand” ahead of the release of March inflation data, a trader said in an e-mail.

A BusinessWorld poll of 17 analysts held last week yielded a median estimate of 3.8% for March headline inflation.

If realized, this would be faster than the 3.4% print in February, but slower than the 7.6% rate recorded in the same month a year ago.

This would also mark the second straight month that inflation picked up on a monthly basis. Still, this would be the fourth straight month that the consumer price index (CPI) was within the central bank’s 2-4% annual target.

The Philippine Statistics Authority will release March CPI data on April 5, Friday.

T-bill and T-bond rates may track the mixed movements in secondary market yields last week following recent monetary policy signals, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Wednesday, the rates of the 91-day and 182-day T-bills went down by 4.91 basis points (bps) and 0.06 bp week on week to end at 5.7254% and 5.9181%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website. Meanwhile, the 364-day T-bill inched up by 0.95 bp to end at 6.0740%.

On the other hand, the yield on the seven-year bond rose by 3.45 bps week on week to end at 6.2362%.

BSP Governor and Monetary Board (MB) Chairman Eli M. Remolona, Jr. earlier said that while the MB closely monitors the Fed, its own policy decisions are not dependent on the US central bank.

He also said the BSP will likely begin cutting “in the next few policy meetings.”

Meanwhile, MB member and Finance Secretary Ralph G. Recto earlier said he expects the BSP to cut rates twice this year or by 50 bps, although policy easing is unlikely to begin at their meeting this month.

The Monetary Board will next meet on April 8 to review their policy settings.

The BSP in February kept the policy rate steady at a near 17-year high of 6.5% for a third straight review.

The Monetary Board hiked borrowing costs by 450 bps from May 2022 to October 2023 to tame inflation.

Meanwhile, the Fed hiked the fed funds rate by 525 basis points from March 2022 to July 2023 to the 5.25-5.5% range and has kept borrowing costs steady for five straight meetings.

Last week, the BTr raised PHP 15 billion as planned from its offering of T-bills as total bids reached PHP 50.506 billion or more than thrice the amount on the auction block.

Broken down, the Treasury borrowed PHP 5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P15.4 billion. The average rate of the three-month paper went down by 3.4 bps to 5.71%. Accepted rates ranged from 5.66% to 5.775%.

The government likewise made a full P5-billion award of the 182-day securities, with bids reaching PHP 15.771 billion. The average rate of the six-month T-bill stood at 5.88%, down by 3.6 bps from the week prior, with accepted rates at 5.85% to 5.9%.

Lastly, the BTr raised PHP 5 billion as planned via the 364-day debt papers as demand totaled PHP 19.335 billion. The average rate of the one-year T-bill went down by 5.1 bps to 5.982%. Accepted yields were from 5.95% to 5.997%.

Meanwhile, the reissued seven-year T-bonds to be offered on Tuesday were last auctioned off on March 5, where the government raised PHP 30 billion as planned at an average rate of 6.27%.

The BTr is looking to raise PHP 195 billion from the domestic market this month, or PHP 75 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. — Aaron Michael C. Sy