T-bill, bond rates seen broadly steady

RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week may move sideways as the market awaits the release of March inflation data, which could affect the central bank’s next move.

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 two years and 10 months.

Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a report that appetite for government securities will depend on the March inflation report.

The Philippine Statistics Authority will release March inflation data on April 5, Wednesday.

A BusinessWorld poll of 16 analysts yielded a median estimate of 8.1% for March headline inflation, near the upper end of the 7.4% to 8.2% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.

If realized, this will be down from the 8.6% in February, but faster than the 4% print in March 2022. March would also be the 13^th straight month that inflation was above the BSP’s 2-4% target for the year.

T-bill and T-bond rates could track secondary market yields after BSP Governor Felipe M. Medalla said a tightening pause is unlikely in their May review, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The upcoming three-year Treasury bond auction yield is expected to be close to the comparable three-year PHP BVAL (Bloomberg Valuation Service) yield at 5.88% as of March 31,” Mr. Ricafort said.

Mr. Medalla last week said it may be too early for the central bank to pause from raising interest rates at its next policy meeting on May 18 as they still need to see a significant slowing in inflation.

The BSP’s policy-setting Monetary Board last month increased benchmark interest by 25 bps as inflation remains elevated, bringing its policy rate to 6.25%.

Since May 2022, the central bank has raised rates by a cumulative 425 bps.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went up by 8.35 basis points (bps), 11.84 bps, and 8.90 bps week on week to end at 5.0501%, 5.6771%, and 6.0287%, respectively, based on the PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bond’s yield dropped by 3.11 bps week on week to 6.094%, while the three-year paper, the tenor closest to the remaining life of the T-bonds on offer on Tuesday, saw its rate decline by 1.33 bps to 5.8812%.

A trader said the T-bill auction could have a result similar to previous offerings, with demand for the one-year tenor seen to be high as its yield is at around 6%, which is close to the BSP’s key rate. 

The trader likewise expects healthy demand for Tuesday’s T-bond offer amid ample liquidity in the market, which could cause the issue’s average rate to range from 5.8% to 5.9%.

Last week, the Treasury raised just PHP 8.553 billion from its offer of T-bills, below the P15-billion program, even as total bids reached PHP 23.252 billion.

Broken down, the Treasury made a partial PHP 1.428-billion award of the 91-day T-bills versus the PHP 5-billion program, even as tenders for the tenor totaled PHP 6.038 billion. The average rate of the three-month paper rose by 23.80 bps to 5.149%, with the Treasury only accepting bids with this yield.

The government likewise borrowed just PHP 2.125 billion via the 182-day securities, lower than the PHP 5-billion plan, despite demand for the tenor reaching PHP 5.635 billion. The six-month T-bill was quoted at an average rate of 5.677%, climbing by 12.10 bps. Accepted rates ranged from 5.65% to 5.693%.

Lastly, the BTr raised PHP 5 billion as planned from the 364-day debt papers as bids for the tenor reached PHP 11.579 billion. The average rate of the one-year paper went up by 14.70 bps to 5.987%. Accepted yields were from 5.95% to 6.023%.

Meanwhile, the reissued seven-year T-bonds to be auctioned off on Tuesday were last offered on July 5, 2022, where the government raised the programmed P35 billion. The bonds fetched an average rate of 5.905%, with accepted rates at 5.6% to 5.999%.

The Treasury wants to raise PHP 160 billion from the domestic market this month, or PHP 60 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. — AMCS