T-bill, bond yields may decline as inflation eases

RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week may ease after the release of data showing better-than-expected headline inflation in March.

The Bureau of the Treasury (BTr) will auction off PHP 15 billion in T-bills on Tuesday, made up of PHP 5 billion each in 91-, 182-, and 364-day papers.

On Wednesday, it will offer PHP 25 billion in reissued 10-year T-bonds that have a remaining life of nine years and five months.

Rates for T-bills could move sideways this week, while the T-bond yields could ease, tracking secondary market movements after the release of March consumer price index (CPI) data, a trader said in a Viber message.

The reissued bonds on offer this week could fetch rates from 6.05% to 6.15%, the trader said.

“Treasury bill yields could slightly ease again, after the slightly week-on-week declines in the comparable short-term PHP BVAL (Bloomberg Valuation Service) yields,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

“The upcoming nine-year Treasury bond auction yield could be similar to the comparable nine-year PHP BVAL yield at 6.14% as of April 5, 2023, lower week on week by -0.05,” Mr. Ricafort added.

Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a report that the T-bonds to be auctioned off this week could be quoted at 6% to 6.15%.

At the secondary market on Friday, the yield on the 91-day T-bill went up by 9.78 basis points (bps) week on week to end at 5.1479%, while the 182-, and 364-day T-bills fell by 3.60 bps and 3.43 bps to fetch 5.6411%, and 5.9944%, respectively, based on the PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the 10-year bond’s yield dropped by 16.75 bps week on week to 6.048%.

Philippine headline inflation in March eased to its slowest in six months amid lower prices of food and transport, the statistics agency said last week.

Preliminary data from the Philippine Statistics Authority showed annual headline inflation eased to 7.6% from 8.6% in February. However, this was faster than the 4% print a year ago.

March inflation was the slowest since the 6.9% print in September 2022. This was also below than the 8.1% median in a BusinessWorld poll of analysts.

For the first quarter, the CPI averaged 8.3%, higher than the Bangko Sentral ng Pilipinas’ 6% forecast and the 2-4% target for the year.   

Last week, the Treasury raised just PHP 12.8 billion from its offer of T-bills, below the PHP 15-billion program, even as total bids reached PHP 34.19 billion.

Broken down, the Treasury made a full P5-billion award of the 91-day T-bills as tenders for the tenor totaled PHP 13.94 billion. The average rate of the three-month paper went down by 10.40 bps to 5.045%, with accepted rates ranging from 5.03% to 5.06%.

The BTr likewise raised P5 billion as planned from the 364-day debt papers as bids stood at PHP 9.815 billion. The average rate of the one-year paper went down by 1 bp to 5.977%. Accepted yields were from 5.43% to 6%.

Meanwhile, the government borrowed just PHP 2.8 billion via the 182-day securities, lower than the PHP 5-billion plan, despite demand for the tenor reaching PHP 10.435 billion. The six-month T-bill was quoted at an average rate of 5.674%, inching down by 0.3 bp, with accepted rates ranging from 5.668% to 5.68%.

On the other hand, the reissued 10-year T-bonds to be auctioned off on Wednesday were last offered on March 7, where the government raised PHP 25 billion as planned. The bonds fetched an average rate of 6.378%, with accepted rates at 6.223% to 6.410%.

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. —By Aaron Michael C. Sy