T-bill, bond rates may be mixed on inflation bets

Rates of Treasury bills (T-bills) and Treasury bonds (T-bonds) may be mixed this week, tracking secondary market yields amid increased liquidity in the financial system, and amid expectations of faster February inflation.

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 10 months.

T-bill and T-bond rates may track the mixed movements of secondary market yields last week, which came amid increased market liquidity amid maturing issuances, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“This whole trading week was basically quiet as the market was overwhelmed by the overshooting of the five-year RTB (retail Treasury bonds) target, paired with the BTr’s borrowing schedule revision for March,” a trader said in an e-mail.

At the secondary market on Friday, the rates of the 91- and 182-day T-bill rates went up by 10.66 basis points (bps) and 5.3 bps week on week to end at 5.7292%, 5.9575%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website. Meanwhile, the 364-day T-bill rate went down by 2.35 bps to end at 6.1088%.

The seven-year bond inched down by 2.87 bps week on week to 6.2327%.

Meanwhile, the government raised a record PHP 584.86 billion from its offering of five-year retail bonds, exceeding the PHP 400-billion target mentioned by BTr Officer-in-Charge Sharon P. Almanza. The RTBs fetched a coupon rate of 6.25% and were issued on Wednesday.

On the other hand, the BTr last week revised its borrowing schedule for March to offer longer T-bond tenors.

The BTr is now looking to raise PHP 30 billion from seven-year T-bonds on March 5, via 10-year papers on March 12, through 20-year bonds on March 19, and from six-year debt on March 26.

It previously planned to raise PHP 30 billion from three-year T-bonds on March 5, via five-year papers on March 12, from seven-year bonds on March 19, and through 10-year securities on March 26.

The average rate of the seven-year bonds on offer this week will depend on February inflation data, the trader added.

“The seven-year bond for auction [this] week will be interesting and could tip over the fragile long ends if it gets awarded beyond 6.3%. Initial indication is between 6.25% and 6.35%,” the trader said.

A BusinessWorld poll of 16 analysts conducted last week yielded a median estimate of 3% for the February consumer price index (CPI), within the 2.8-3.6% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.

If realized, February inflation would be faster than the 2.8% in January but slower than 8.6% in the same month a year ago. This would mark the third straight month that CPI was within the BSP’s 2-4% annual target. 

February inflation data will be released on Tuesday, March 5.

Last week, the BTr raised PHP 14.8 billion from its offering of T-bills, lower than the planned PHP 15 billion, even as total bids reached PHP 35.765 billion or more than twice the amount on the auction block.

Broken down, the Treasury raised PHP 5 billion as planned from the 91-day T-bills as tenders for the tenor reached PHP 8.115 billion. The average rate for the three-month paper rose by 11.8 bps to 5.71%. Accepted rates ranged from 5.674% to 5.725%.

The BTr likewise borrowed the programmed PHP 5 billion via the 364-day debt papers as demand totaled PHP 15.24 billion. The average rate of the one-year T-bill inched up by 0.6 bp to 6.085%. Accepted yields were from 6.05% to 6.096%.

Meanwhile, the government raised just PHP 4.8 billion from the 182-day securities, below the PHP 5-billion program, despite bids for the tenor reaching PHP 12.41 billion. The average rate for the six-month T-bill inched down by 0.1 bp to 5.971%, with accepted rates at 5.925% to 5.999%.

On the other hand, the reissued T-bonds to be offered on Tuesday were first offered on Jan. 16, when the government raised PHP 35 billion, higher than the PHP 30-billion program after the BTr opened its tap facility to take advantage of the strong demand seen for the debt papers. The bonds fetched a coupon rate of 6.125% and an average rate of 6.094%.

The BTr is looking to raise P180 billion from the domestic market this month, or PHP 60 billion from T-bills and PHP 120 billion via T-bonds.

It borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year. — A.M.C. Sy