Treasury bill, bond rates to rise

Rates of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could rise further amid the peso’s continued weakness against the dollar and its effect on inflation and borrowing costs.

The Bureau of the Treasury (BTr) on Monday will auction off P15 billion in T-bills, or P5 billion each in 91-, 182-, and 364-day papers.

On Tuesday, it will offer P30 billion in reissued 20-year T-bonds with a remaining life of seven years and two months.

T-bill and T-bond rates could track the rise in secondary market yields following the peso’s continued depreciation against the dollar, which could lead to some uptick in inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the 91-,182-, and 364-day T-bills went up by 3.55 basis points (bps), 3.97 bps and 1.64 bps week on week to end at 5.9018%, 6.0201, and 6.0508%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

The 20-year bond also rose by 26.77 bps week on week to close at 7.0667%, while the seven-year debt, the tenor closest to the remaining life of the issue to be offered on Tuesday, dropped by 14.80 bps to 6.9266%.

On Friday, the peso closed at P57.71 per dollar, strengthening by seven centavos from its 17-month low finish of P57.78 on Thursday, Bankers Association of the Philippines data showed.

Week on week, however, the peso dropped by six centavos from its P57.65 finish on April 19.

Year to date, the local unit has depreciated by P2.34 from its P55.37-a-dollar close on Dec. 29, 2023.

Headline inflation picked up to 3.7% year on year in March from 3.4% in February. This was slower than the 7.6% clip in the same month last year and marked the fourth straight month that the consumer price index (CPI) was within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% annual target.

For the first quarter, headline inflation averaged 3.3%, below the BSP’s baseline forecast of 3.8% and risk-adjusted forecast of 4%.

Meanwhile, the T-bonds on offer this week could be partially awarded and could fetch rates 6.85% and 7% after Finance Secretary Ralph G. Recto last week the peso’s decline is unlikely to prompt the central bank to raise borrowing costs at their policy review next month, a trader said in an e-mail.

“For [this] week, seven-year bond auction will likely underwhelm as players struggle to keep their heads above water,” the trader said.

The BSP’s next policy move “will be dependent on inflation data,” Mr. Recto said in a mobile-phone reply to Bloomberg News last week. Asked if a rate hike is being considered as the local currency slipped to as low as P57.96 against the dollar on Thursday, Mr. Recto said: “For now, I don’t think so.”

Last week, the BTr raised P15 billion as planned from the T-bills it offered, even as rates climbed across the board, as total bids reached P44.84 billion or nearly thrice the amount on the auction block.

Broken down, the BTr borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P13.1 billion. The average rate of the three-month paper rose by 1.8 bps to 5.888% from the previous week. Accepted rates ranged from 5.845% to 5.92%.

The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P15.98 billion. The average rate for the six-month T-bill stood at 6.002%, up by 2.9 bps, with accepted rates at 5.985% to 6.002%.

Lastly, the Treasury raised P5 billion as planned via the 364-day debt papers as demand for the tenor totaled P15.76 billion. The average rate of the one-year debt went up by 3.6 bps to 6.08%. Accepted yields were from 6.055% to 6.09%.

Meanwhile, the reissued 20-year bonds to be auctioned off on Tuesday carry a coupon rate of 8%.

The BTr’s most recent auction of seven-year bonds, the tenor closest to the remaining life of the papers to be offered this week, was held on April 2, when it awarded the reissued papers at an average rate of 6.299%.

The Treasury plans to raise P195 billion from the domestic market this month or P75 billion from T-bills and P120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its P1.48-trillion budget deficit, which is capped at 5.6% of gross domestic product for this year. — A.M.C. Sy