RATES for Treasury bills (T-bills) and Treasury bonds (T-bonds) this week’s offer is possible rising expectations for further fiscal tightening as war in the Middle East continues to damage the Philippines’ economic prospects.
The Bureau of the Treasury (BTr) will auction up to P39 billion in T-Bills on Monday, or P10 billion to P13 billion each in the 91-, 182- and 364-day papers.
On Tuesday, the government seeks to raise P30 billion in the reissuance of seven-year T-bonds with maturities of four years and eight months.
T-bill and bond prices may rise, mirroring the week-to-week gains seen in secondary yield markets, as April’s faster-than-expected headline inflation strengthened views of more hikes by the Bangko Sentral ng Pilipinas (BSP), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort says Viber’s message.
“[This] may lead to further increases in the BSP rate in the future to better manage inflation and inflation expectations, with the objective of fulfilling the central bank’s mandate of price stability to provide a favorable environment for sustainable economic growth in the long term,â he said.
He added that yields fell slightly late in the week following soft first-quarter gross domestic product (GDP) data, although renewed tensions between the United States and Iran kept the market on edge.
Meanwhile, the trader said in an email that the bonds that were reissued on Tuesday could still be well received even in the face of continued uncertainty about the situation in the Middle East, and rates could be between 6.9% and 6.95%.
In the secondary market on Friday, yields on 91-, 182, and 364-day T-bills jumped by 17.81 basis points (bps) to 4.7998%, 47.7 bps to 5.2372%, and 21.52 bps to 5.4295% respectively.
On the other hand, the seven-year bond rate increased by 11.45 bps on the week to 7.0652%, while the five-year debt, which is the tenor closest to the remaining life of the paper to be sold this week, increased by 8.39 bps to 6.9547%.
Philippine inflation rose to 7.2% in April, up sharply from 4.1% in March and 1.4% last year. This was the fastest headline print in three years or since the 7.6% recorded in March 2023. This was also well above the average rate of 5.5% BusinessWorld a survey of 17 analysts and the central bank’s forecast of 5.6%-6.4% for this month.
April also marked the second consecutive month in which the consumer price index was above the BSP’s tolerance band of 2%-4%.
On April 23, the Monetary Board raised interest rates by 25 bps for the first time in two years, bringing the policy rate to 4.5%. BSP Governor Eli M. Remolona, ââJr. has signed off on further tightening ahead of a “sequence of low rate hikes” to help curb inflation and keep inflation expectations firm.
Meanwhile, Philippine GDP grew 2.8% in the first quarter, down from 5.4% last year and slower than the 3% pace in the fourth quarter. This was below the average of 3.4% in a BusinessWorld a survey of 21 analysts.
Last week, the government raised P28.07 billion through debt auctions, down from P31-billion as the total tenders reached P44.295 billion.
The treasury raised P12 billion as planned through the 91-day T-Bill as the tenor requirement reached P20.425 billion. The three-month paper fetched an average yield of 4.711%, up 15.3 bps from the yield seen last week. The bids received were fruitful from 4.625% to 4.75%.
Meanwhile, the government only borrowed P9.68 billion with a 182-day loan, less than the P10-billion total as tenders reached P15.98 billion. The average six-month T-bill rate was at 4.964%, up 22.7 bps from the previous auction. The awarded tenders ranged from 4.85% to 5.048%.
Of the 364-day securities, BTr sold only P6.39 billion, less than the P9 billion offered as bids reached only P7.89 billion. One-year paper yielded an average yield of 5.377%, up 19.3 bps each week. The bids received ranged from 5.2% to 5.5%.
Meanwhile, the seven-year reissued bonds that will be sold on Tuesday were last issued on March 3, when the government raised P30 billion as planned at an average rate of 5.717%, below the 6.125% coupon.
The Department of Finance wants to collect P268 billion from the domestic market this month, or P128 billion in T-bills and P140 billion in T-bonds.
The government is borrowing from domestic and foreign sources to help finance its budget deficit, which has reached P1.61 trillion or 5.3% of GDP this year. – AMC Sy
