T-bill, bond rates may rise ahead of BSP meeting

The rates of Treasury bills (T-bills) and retail Treasury bonds (RTBs) are expected to go up this week ahead of the Philippine central bank’s policy meeting.

The government securities could track the slight increase in secondary market yields as the Bangko Sentral ng Pilipinas (BSP) is expected to mirror the US Federal Reserve and keep its key rate steady on Feb. 15, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The Bureau of the Treasury (BTr) will auction off PHP 15 billion in T-bills on Monday — PHP 5 billion each in 91-, 182- and 364-day debt. On Tuesday, it will hold its rate-setting auction for five-year RTBs due in 2029.

The Treasury will cancel the auction for seven-year Treasury bonds on Tuesday due to the retail bond sale.

At the secondary market on Thursday, the rate of 91-day T-bills went up by 1.88 basis points (bps) week on week to 5.4610%, based on PHP Bloomberg Valuation Service Reference Rates data posted on the Philippine Dealing System’s website.

The 364-day T-bill rose by 1.37 bps to 6.0577%, while the 182-day debt fell by 0.31 bp to 5.8095%. The five-year bond rose by 4.49 bps to 6.1313%.

“The next local policy rate-setting meeting on Feb. 15 could match the Fed rate pause on Jan. 31 to maintain healthy interest rate differentials,” Mr. Ricafort said.

Fifteen of 17 analysts in a BusinessWorld poll last week expected the Monetary Board to keep the target reverse repurchase (RRP) rate at 6.5% on Thursday.

The Monetary Board raised borrowing costs by 450 bps from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

The Fed held its target rate steady at 5.25-5.5% for a fourth straight time at its Jan. 30-31 meeting. It raised borrowing costs by 525 bps from March 2022 to July 2023.

Last week, the Treasury bureau raised PHP 15 billion as planned from its T-bills auctions as total bids reached PHP 47.415 billion, more than thrice the amount on the auction block.

The Treasury fully awarded P5 billion of the 91-day T-bills as tenders hit PHP 12.985 billion. The average rate of the three-month debt rose by 6.3 bps to 5.461% from a week earlier. Accepted rates were 5.425% to 5.495%.

The government also raised PHP 5 billion from the 182-day debt as bids hit PHP 13.94 billion. The average rate of the six-month debt rose by 5.1 bps to 5.861%, with accepted rates at 5.84% to 5.873%.

The Treasury also borrowed the programmed PHP 5 billion via the 364-day debt as demand reached PHP 20.58 billion. The average rate of the one-year T-bill shed 0.1 bp to 6.075%. Accepted yields were 6.05% to 6.098%.

The bureau plans to raise P210 billion from the domestic market this month — PHP 60 billion in T-bills and PHP 150 billion in 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 or PHP 1.39 trillion. – Aaron Michael C. Sy, Reporter