Treasury bill, bond rates expected to move sideways ahead of inflation data

RATES of government securities are seen to move sideways this week ahead of release of the inflation data and amid expectations for further rate hikes in June.

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

On Tuesday, it will auction off P35 billion in reissued three-year Treasury bonds (T-bonds) with a remaining life of two years and 10 months.

“T-bills will just likely mirror the previous auction, with rates seen to move sideways,” a trader said in a Viber message.

Meanwhile, the average rate of the three-year T-bond would likely range between 4.950% and 5.150%, the trader said.

A second trader also expects a lackluster demand for the T-bills up for offer on Monday, as the market is expecting further rate hikes for June. For the T-bonds, the second trader gave a range of 5% to 5.25%, citing the lack of supply on short bonds.

“Yields in the secondary market were steady this past week as market players digested the Federal Open Market Committee (FOMC) minutes and cheered President-elect [Ferdinand “Bongbong” R.] Marcos, Jr.’s announcements on his economic team,” the trader said via Viber.

The minutes of the FOMC’s May meeting, which culminated in a 50-basis-point hike in the Fed funds target rate — the biggest jump in 22 years, showed most of the committee’s members judged that further such rate hikes would “likely be appropriate” at its upcoming June and July meetings, Reuters reported.

Back home, Mr. Marcos recently tapped Arsenio M. Balisacan to return to the National Economic and Development Authority, former University of the Philippines President Alfredo E. Pascual to lead the Department of Trade and Industry, and current Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno to head the Department of Finance.

Felipe M. Medalla will complete Mr. Diokno’s term as central bank governor.

“I think [it] will be more of the same [rates] with market defensive considering May [consumer price index] will be out the following week,” a third trader said in an e-mail. “I think most will be looking out for this number and if [the] incoming [governor] will reverse his tone that there is no need to rush rate increases.”

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that government securities are likely to go up slightly, in line with the secondary market, amid higher oil prices and a weaker peso.

Reuters reported that on Friday, Brent crude rose $2.03, or 1.7%, to settle at $119.43. US West Texas Intermediate (WTI) crude rose 98 cents, or 0.9%, to settle at $115.07 a barrel. For the week, Brent rose 6% while WTI gained 1.5%.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.4533%, 1.7681%, and 2.0401%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the three-year bond fetched a yield of 4.8121%.

Amid rising inflation and the central bank hiking its key policy rates, the government fully awarded its offer of T-bonds while only partially awarding its offer of T-bills last week.

Last week, the BTr partially awarded its offer for T-bills even as tenders reached P36.545 billion, more than double the P15 billion on offer.

Broken down, the government raised P5 billion as programmed through the 91-day T-bills as tenders for the tenor reached P21.63 billion. The average rate of the three-month debt was at 1.675%, 21.23 basis points (bps) higher than the 1.4627% seen at the secondary market prior to the auction.

Meanwhile, the Treasury partially awarded the 182-day securities, raising just P3.5 billion versus the P5-billion plan despite bids reaching double the offer at P10.6 billion. The average yield on the six-month T-bill was at 1.892%, 13.67 bps higher than the 1.7697% fetched for the tenor at the secondary market.

Lastly, the BTr rejected all bids for the one-year T-bills as bids reached just P4.32 billion, below the P5-billion program. Had the government fully awarded its offer, the average rate for the one-year tenor would have soared to 2.93%, 91.81 bps higher than the 2.0401% fetched at the secondary market prior to the auction.

Meanwhile, the last time the government offered the three-year T-bonds to be auctioned off on Tuesday was on April 5, where it raised just P25.791 billion despite bids reaching P53.578 billion. The debt papers carry a coupon rate of 4.25%.

The BTr wants to raise P250 billion from the domestic market in June, or P75 billion through T-bills and P175 billion from T-bonds.

The government borrows from local and external sources to help plug a budget deficit capped at 7.7% of gross domestic product this year. — Tobias Jared Tomas with Reuters