T-bill, bond rates may rise amid market caution

Rates of Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may rise amid weak demand due to market caution following slower-than-expected March inflation.

The Bureau of the Treasury (BTr) will auction off P15 billion in T-bills on Monday, or P5 billion each in 91-, 182-, and 365-day papers.

It will also offer P30 billion in reissued 10-year T-bonds with a remaining life of nine years and nine months.

The T-bond auction was moved to Monday from the usual Tuesday schedule, with the settlement of both T-bills and T-bonds offered that day to be on Thursday, due to non-working days on Tuesday, April 9 (Day of Valor) and Wednesday, April 10 (Eid’l Fitr).

“On Monday, both T-bills and the 10-year bond will be auctioned and we think will be poorly received,” a trader said in an e-mail.

“The GS (government securities) market remains anxious amid a slower-than-expected CPI (consumer price index) print at 3.7% year on year versus the expected 3.8%. Rice continues to soar, which is the main driver for the print,” the trader said.

The trader said the T-bonds to be offered this week could fetch rates ranging from 6.35% to 6.5%.

“The BTr’s borrowing appetite will be closely monitored here … A partial award could be expected,” the trader added.

Headline inflation picked up for a second straight month in March as prices of rice continued to surge, the Philippine Statistics Authority (PSA) reported on Friday.

Preliminary data from the PSA showed the CPI quickened to 3.7% year on year in March from 3.4% in February. This was slower than the 7.6% clip in the same month last year.

March inflation settled within the Bangko Sentral ng Pilipinas’ (BSP) 3.4-4.2% forecast for the month. This was also slightly below the 3.8% median estimate in a BusinessWorld poll of 17 analysts conducted last week and marked the fourth straight month that inflation was within the BSP’s 2-4% target range.

For the first three months, inflation averaged 3.3%. The BSP expects inflation to average 3.6% this year.

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

At the secondary market on Friday, the 91-day T-bill rose by 2.73 basis points (bp) week on week to 5.7527%, while the 182-day and 364-day T-bills went down by 2.39 bps and 6.83 bps to 5.8942% and 6.0057%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

On the other hand, the yield on the 10-year bond rose by 9.91 bps week on week to end at 6.3313% on Friday.

Last week, the BTr raised P17 billion from the T-bills it offered, above the P15-billion plan, as total bids reached P47.75 billion or more than thrice the amount on the auction block.

Broken down, the BTr borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P12.928 billion. The average rate for the three-month paper went down by 0.6 bp to 5.704% from the previous week. Accepted rates ranged from 5.655% to 5.75%.

The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P16.26 billion. The average rate for the six-month T-bill stood at 5.865%, down by 1.5 bps, with accepted rates at 5.845 to 5.885%.

Meanwhile, the Treasury raised P7 billion via the 364-day debt papers, more than the P5-billion plan, as tenders for the tenor totaled P18.562 billion. The average rate of the one-year T-bill went down by 1.7 bps to 5.965% from the 5.982% quoted for the previous P5-billion award. Accepted yields were from 5.945% to 5.985%.

On the other hand, the reissued 10-year T-bonds to be offered on Monday were last auctioned off on March 12, where the government raised P30 billion as planned at an average rate of 6.227%.

The BTr is looking to raise P195 billion from the domestic market this month, or P75 billion from T-bills and P120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.6% of gross domestic product this year. — A.M.C. Sy