Treasury bill, bond rates seen to move sideways

RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) may move sideways due to US economic data that could affect the US Federal Reserve’s next policy 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 25-year T-bonds that have a remaining life of 12 years and six months.

A trader said the T-bills will trade sideways this week, with the BTr expected to reject some bids again.

Meanwhile, the T-bonds may fetch rates of 6.35% to 6.5%, with the maturity of five-year bonds last week and US data to affect the range.

The trader said US economic data could impact the Fed’s next move, which could likewise affect the Bangko Sentral ng Pilipinas’ (BSP) policy decision this month.

“US labor data and February US CPI (consumer price index) would have a larger say in defrosting local risk appetite, assuming their updates do not pose upside surprises,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion likewise said in a report.

The US Labor department on Friday said nonfarm payrolls increased by 311,000 jobs in February, Reuters reported.

US unemployment growth also hit 3.6%, slower than January’s 3.4% which was the lowest since May 1969.

However, average hourly earnings only increased by 0.2% last month, compared with 0.3% in January. This lowered the year-on-year increase in wages to 4.6% from 4.4% in January.

Meanwhile, February US CPI data will be released on March 14, Tuesday.

US consumer inflation increased 0.5% in January after gaining 0.1% in December. In the 12 months through January, the CPI increased 6.4%.

The inflation report will be the last major data to be released before the Fed’s next policy meeting on March 21-22.

The US central bank hiked its target interest rate by 25 basis points (bps) at its January 31 to February 1 meeting to a range between 4.5% and 4.75%.

Since March 2022, the Fed has raised rates by a total of 450 bps.

Meanwhile, the BSP will hold its own policy review on March 23.

The Philippine central bank last month hiked benchmark interest rates by 50 bps, bringing the key rate to 6%. The move brought cumulative increases since May 2022 to 400 bps.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that T-bill rates could track secondary market movements.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went up by 9.42 basis points (bps), 15.31 bps, and 10.74 bps week on week to end at 4.7112, 5.3295%, and 5.7163%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

“The upcoming 13-year Treasury bond auction yield could be close to the comparable 12-year PHP BVAL yield currently at 6.41% as of March 10, 2023,” Mr. Ricafort said.

“Lower long-term PHP BVAL yields could also be due to the PHP 76.8-billion five-year Treasury bonds that matured on March 8,” he added.

Last week, the BTr raised just PHP 9.705 billion from its offering of T-bills, lower than the PHP 15-billion program, as rates climbed across the board.

Broken down, the Treasury made a partial PHP 2.455-billion award of the 91-day T-bills versus the PHP 5-billion program, despite tenders reaching PHP 5.712 billion. The average rate of the three-month paper rose by 17.3 bps to 4.586%. Accepted rates ranged from 4.53% to 4.65%.

The government likewise borrowed just PHP 2.25 billion via the 182-day securities, lower than the P5-billion plan, even as demand for the tenor reached PHP 6.8 billion. The six-month T-bill was quoted at an average rate of 5.378%, rising by 20.1 bps, with the BTr only accepting offers with yields of 5.378%.

Meanwhile, the BTr made a full PHP 5-billion award of the 364-day debt papers as bids for the tenor reached PHP 8.157 billion. The average rate of the one-year paper climbed by 13 bps to 5.707%. Accepted yields were from 5.65% to 5.743%.

On the other hand, the reissued 25-year T-bonds to be auctioned off on Tuesday were last offered on January 10, where the government raised the programmed PHP 35 billion. The bonds fetched an average rate of 7.182%, with accepted rates at 7.125% to 7.23%.

The Treasury wants to raise PHP 200 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 125 billion via T-bonds.

The government borrows from local and foreign sources to finance its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy