T-bill, bond rates may go up on rising oil prices

Rates of Treasury bills (T-bills) and bonds on offer this week could climb further amid rising global crude oil prices due to the conflict in the Middle East.

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 Treasury bonds (T-bonds) with a remaining life of six years and nine months.

T-bill and bond yields may track the increases seen at the secondary market on Friday due to higher global crude oil prices caused by the conflict between Israel and Palestine, 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 up by 15.92 basis points (bps), 13.52 bps, and 6.47 bps week on week to end at 5.8711%, 6.1458%, and 6.3085%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

The seven-year bond also rose by 3.67 bps week on week to yield 6.5122%.

Oil prices rose on Friday, with crude soaring nearly 6%, on safe-haven buying driven by the escalating Middle East conflict as Israel urged civilians to leave the northern Gaza Strip, Reuters reported.

Brent crude surged by 7.5% in the week since the conflict began, posting its highest weekly gain since February, as investors priced in a chance of escalation in the world’s top oil producing region.

Yields could also be affected by policy signals from the Bangko Sentral ng Pilipinas (BSP) and US Federal Reserve, a trader said in an e-mail.

BSP Governor Eli M. Remolona, Jr. last week said the Monetary Board is open to hiking borrowing costs by 25 bps in their meeting next month following faster-than-expected September inflation.

The Monetary Board has kept the benchmark interest rate at 6.25% for four straight meetings after it hiked borrowing costs by 425 bps from May 2022 to March 2023 to help tame inflation.

Its next meeting is on Nov. 16.

Meanwhile, the Fed kept its benchmark rate unchanged at the 5.25% to 5.5% range at its Sept. 19-20 meeting. It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

The Federal Open Market Committee will hold its next policy review from Oct. 31 to Nov. 1.

Last week, the BTr raised just PHP 12.518 billion via the T-bills, short of the PHP 15-billion program, even as total bids reached PHP 22.564 billion.

Broken down, the Treasury borrowed only PHP 4.788 billion via the 91-day T-bills even as tenders for the tenor reached PHP 6.898 billion. The average rate of the three-month paper rose by 10 bps to 5.806%. Accepted rates ranged from 5.74% to 5.875%

The government raised just PHP 4.41 billion from the 182-day securities, despite bids for the tenor reaching PHP 7.646 billion. The average rate for the six-month T-bill was at 6.115%, up by 9.2 bps, with accepted rates at 6% to 6.175%.

Lastly, the BTr awarded PHP 3.32 billion in 364-day debt papers, below the PHP 5-billion plan, despite demand for the tenor reaching PHP 8.02 billion. The average rate of the one-year T-bill rose by 9 bps to 6.305%. Accepted yields were from 6.275% to 6.325%.

On the other hand, the reissued seven-year bonds to be offered on Tuesday were last auctioned off on Sept. 12, where the government raised just PHP 9.877 billion out of the planned P30 billion. The papers fetched an average rate of 6.37%.

The Treasury wants to raise PHP 150 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 90 billion via T-bonds. — AMCS with Reuters