T-bill, T-bond yields may rise before BSP meeting

Treasury bill and bond rates may rise this week as the Bangko Sentral ng Pilipinas (BSP) is widely expected to mirror the US Federal Reserve’s pause in its tightening cycle.

Rates on the short-term debt may follow the advance at the secondary market due to recent signals that the BSP may begin cutting the key rate in the first quarter of next year, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message at the weekend.

At the secondary market on Friday, the 91-, 182- and 363-day T-bills went up by 12.84 basis points (bps), 6.67 bps and 11.41 bps week on week to end at 5.8941%, 6.0297%, and 6.0455%, respectively, based on PHP Bloomberg Valuation (BVAL) Service Reference Rates posted on the Philippine Dealing System website.

“With inflation starting to go down, the outlook is that possibly next year, there could be a shift in the BSP’s monetary policy stance,” central bank Deputy Governor Francisco G. Dakila, Jr. said on Thursday.

The Bureau of the Treasury (BTr) will auction off PHP 15 billion worth of T-bills on Monday, or PHP 5 billion each in 91-, 182- and 363-day debt.

On Tuesday, it will offer PHP 25 billion in reissued seven-year T-bonds with a remaining life of five years and 11 months.

Mr. Ricafort said the seven-year yield rose by 10.85 bps week on week to 5.9604% on Friday as investors looked to signals from the BSP ahead of its policy-setting meeting on June 22.

All 15 economists in a BusinessWorld poll last week expected the Monetary Board to keep the key rate at a near 16-year high of 6.25%.

This could be the second straight meeting the BSP will leave interest rates untouched. The central bank has raised borrowing costs by 425 bps since May last year.

The T-bond rate could range between 5.9% and 6%, with weak demand following the trend seen at previous auctions with a similar tenor, a trader said in an e-mail.

“Expect the board to echo what BSP Deputy Governor [Francisco G.] Dakila [Jr.] said — that they are ready to resume monetary action as data warrant it,” the trader said.

Last week, the Treasury bureau raised PHP 13.608 billion from PHP 15 billion worth of T-bills on offer, with bids hitting PHP 20.049 billion.

The Treasury borrowed PHP 3.608 billion from the programmed PHP 5 billion via the 91-day T-bills, with tenders reaching PHP 4.518 billion. The average rate of the three-month securities rose by 9.5 bp to 5.922%. Accepted rates were 5.75% to 6%.

The government fully awarded PHP 5 billion of the 182-day T-bills as bids for the tenor reached PHP 7.72 billion. The six-month T-bill was quoted at an average of 5.978%, up by 8.7 bps from a wee earlier. Accepted rates were 5.85% to 6.05%.

The Treasury also raised PHP 5 billion from 363-day T-bills as demand reached PHP 7.811 billion. The average rate of the one-year T-bill rose by 8.2 bps to 6.062% from a week earlier. Accepted yields were 5.89% to 6.188%.

The reissued seven-year T-bonds to be auctioned off on Tuesday were last offered on Feb. 28, when the government raised the programmed PHP 25 billion. The debt was awarded at an average rate of 6.172%.

The Treasury seeks to raise PHP 185 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 125 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 economic output this year. – Aaron Michael C. Sy