T-bill, bond rates may decline after BSP decision

RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could drop after the central bank kept borrowing costs on hold at its policy meeting.

The Bureau of the Treasury (BTr) will auction off PHP 15 billion in T-bills on Monday, made up of PHP 5 billion each in 91-, 182-, and 364-day papers.

On Tuesday, it will offer PHP 25 billion in reissued seven-year T-bonds that have a remaining life of six years and 11 months.

T-bill and T-bond yields could further ease this week, in line with the decline in secondary market rates after the BSP kept benchmark interest rates unchanged at its meeting last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the 91-, 182-, and 364- day T-bills went down by 9.37 basis points (bps), 15.08 bps, and 4.29 bps week on week to end at ​5.823%, 5.9062%, and 5.9514% respectively, based on the PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.

The seven-year bond also saw its yield drop by 8.08 bps week on week to 5.6809%.

“With the BSP’s Monetary Board still sounding hawkish while likely to maintain an overnight RRP (reverse repurchase) rate of 6.25% for much of the year until core inflation wanes, we reckon benchmark long-duration bonds would still court favor among market investors,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

The BSP on Thursday kept benchmark rates steady amid easing inflation.

The policy-setting Monetary Board kept its key rate or the interest rate on the BSP’s overnight RRP facility at 6.25%.

The central bank paused for the first time after hiking in nine straight meetings, raising borrowing costs by a total of 425 bps from May 2022 to March 2023.

Headline inflation slowed to an eight-month low of 6.6% in April. For the first four months of the year, the consumer price index averaged 7.9%, still well above the BSP’s 2-4% target for the year.

Last week, the BTr raised PHP 15 billion as planned from the T-bills as the offer was nearly four times oversubscribed, with total bids reaching PHP 59.596 billion.

Broken down, the Treasury borrowed PHP 5 billion as planned via the 91-day T-bills, with tenders reaching PHP 14.642 billion. The average rate of the three-month papers went down by 1.70 bps to 5.874%, with accepted rates ranging from 5.8% to 5.9%.

The government also made a full PHP 5-billion award of the 182-day securities as bids for the papers reached PHP 14.271 billion. The six-month tenor was quoted at an average rate of 5.991%, inching down by 0.20 bp week on week, with accepted rates from 5.9% to 6.786%.

Lastly, the BTr raised the programmed PHP 5 billion from the 364-day debt papers as demand for the tenor reached PHP 30.683 billion. The average rate of the one-year T-bill fell 18.30 bps to 6.028%. Accepted yields were from 5.993% to 6.09%.

Meanwhile, the reissued seven-year T-bonds to be auctioned off on Tuesday were first offered on April 25, where the government raised the programmed PHP 25 billion at a coupon rate of 6%. Accepted yields ranged from 5.975% to 6.06%, for an average of 6.012%.

The Treasury wants to raise PHP 175 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 100 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. — A.M.C. Sy