T-bill, bond rates to track secondary mart levels

Rates of Treasury bills (T-bills) and bonds (T-bonds) to be auctioned off this week may inch higher, mirroring the slight upward correction in secondary market yields following weeks of decline amid increased expectations of a rate cut by the Bangko Sentral ng Pilipinas (BSP) as early as next month.

The Bureau of the Treasury (BTr) will auction off PHP 20 billion in T-bills on Monday, or PHP 6.5 billion each in 91- and 182-day papers and PHP 7 billion in 364-day debt.

On Tuesday, the government will offer PHP 25 billion in reissued 20-year T-bonds with a remaining life of 19 years and 10 months.

Yields on the T-bills and T-bonds on offer this week could track the slight rise in secondary market yields on Friday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Mr. Ricafort noted that secondary market rates inched up last week but still remained relatively low due to mounting bets of a BSP rate cut by August.

Secondary market rates rose week on week due to higher US Treasury yields recently, a trader said in an e-mail.

The trader added that the 20-year T-bonds on offer this week could fetch rates ranging from 6.4% to 6.5%.

“We believe that the BTr might do a partial award or reject if bids get higher than secondary yields, given its aggressive tap award in last week’s 10-year auction.”

At the secondary market on Friday, the rates of the 91-day, 182-day, and 364-day T-bills went up by 5.1 basis points (bps), 3.84 bps, and 5.73 bps week on week to end at 5.7355%, 6.0223%, and 6.1053%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website. The 20-year bond likewise rose by 1.76 bps week on week to 6.3828%.

BSP Governor Eli M. Remolona, Jr. last month said the Monetary Board may deliver its first rate cut in over three years at its Aug. 15 review — the only policy meeting scheduled in the third quarter — as they expect inflation to continue easing this semester.

Meanwhile, the BTr on Tuesday raised PHP 30 billion as planned via the bonds as total bids reached PHP 96.605 billion, or more than thrice the amount on the auction block. The bonds, which have a remaining life of nine years and six months, were awarded at an average rate of 6.212%. Accepted yields ranged from 6.18% to 6.223%.

To accommodate the strong demand, the BTr opened its tap facility window, from which it accepted another PHP 30 billion in bids. This brought last week’s total award to PHP 60 billion, and the total outstanding volume for the series to PHP 201.9 billion.

Last week, the BTr raised PHP 22.6 billion from the T-bills it offered, higher than the PHP 20-billion program, as total bids reached PHP 46.736 billion, or more than twice the amount placed on the auction block.

Broken down, the Treasury borrowed PHP 6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 15.51 billion. The average rate of the three-month papers rose by 1.9 bps to 5.717% from the previous week. Accepted rates ranged from 5.702% to 5.74%.

Meanwhile, the government awarded PHP 9.1 billion in 182-day securities, higher than the PHP 6.5-billion plan, as bids for the tenor reached PHP 17.525 billion. The average rate for the six-month T-bill stood at 5.978%, inching up by 1 bp week on week, with accepted rates at 5.95% to 5.998%.

Lastly, the Treasury raised the planned PHP 7 billion via the 364-day debt papers as demand totaled PHP 13.701 billion. The average rate of the one-year debt decreased by 0.1 bp to 6.072%. Accepted yields were from 6% to 6.09%.

On the other hand, the reissued 20-year bonds to be offered on Tuesday were last auctioned off on June 26, where the government raised PHP 30 billion as planned at an average rate of 6.86%, 1.5 bps below the 6.875% coupon rate.

The BTr wants to raise PHP 215 billion from the domestic market this month, or PHP 100 billion from T-bills and PHP 115 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy