Treasury bills, bonds may fetch lower yields on BSP easing bets

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may go down on expectations that the Bangko Sentral ng Pilipinas (BSP) could resume its easing cycle as early as next month following dovish comments from policy makers.

The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday, or P7 billion each in 91- and 182-day papers and P8 billion in 364-day papers.

On Tuesday, the government will offer P35 billion in T-bonds — P10 billion in reissued seven-year debt with a remaining life of three years and 27 days and P25 billion in reissued 25-year bonds with a remaining life of 24 years and 10 months.

T-bill and T-bond rates could be in line with secondary market yields, which broadly declined amid dovish signals from the BSP, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A trader said in an e-mail that the reissued seven-year bond could fetch rates ranging from 5.75% to 5.85%, while the 25-year note could see yields within 6.4% to 6.55%.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went down by 7.3 basis points (bps), 4.17 bps, and 10.43 bps week on week to end at 5.1769%, 5.5258% and 5.6877%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of March 21 published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bond climbed by 2.04 bps week on week to 6.0985%, while the three-year debt, the tenor closest to the remaining life of the reissued papers to be offered this week, went down by 1.24 bps to 5.8313%. For its part, the 25-year paper inched down by 0.68 bp week on week to 6.3062%.

BSP Governor Eli M. Remolona, Jr. told Bloomberg News last week that the Monetary Board could cut rates at their April 10 policy meeting following the surprise pause at their February review, especially if March inflation turns out better than expected.

March inflation data will be released on April 4. Inflation sharply eased to 2.1% in February, bringing the two-month average to 2.5%. This is well within the central bank’s 2-4% target.

Mr. Remolona added that the BSP could deliver 50 bps in cuts this year, with 75 bps in reductions likely if economic growth weakens further.

There is a “high probability” that the BSP will deliver a rate cut at its April 10 meeting, Finance Secretary Ralph G. Recto, who is also a Monetary Board member, also told Bloomberg TV last week.

Mr. Recto added that the BSP could reduce benchmark borrowing costs by 50-75 bps this year, which could boost economic growth.

The BSP has brought down benchmark borrowing costs by a cumulative 75 bps since it began its easing cycle in August last year.

Last week, the BTr raised P30.8 billion from the T-bills it auctioned off, higher than the initial P22-billion plan, as total bids reached P118.944 billion, more than five times as much as the amount on offer.

Broken down, the Treasury borrowed P9.8 billion via the 91-day T-bills, higher than the P7-billion plan, as tenders for the tenor reached P35.384 billion. The three-month paper was quoted at an average rate of 5.118%, declining by 6 bps from the previous auction. Tenders accepted by the BTr carried yields of 5.1% to 5.123%.

The government also made a P9.8-billion award of the 182-day securities, above the programmed P7 billion, as bids stood at P31.05 billion. The average rate of the six-month T-bill was at 5.496%, 5.2 bps lower, with accepted rates ranging from 5.45% to 5.513%.

Lastly, the Treasury raised P11.2 billion via the 364-day debt papers, more than the P8 billion placed on the auction block, as demand for the tenor totaled P52.06 billion. The average rate of the one-year debt decreased by 7.6 bps to 5.697%, with bids accepted having yields of 5.693% to 5.713%.

Meanwhile, the two bond issues to be auctioned off this week were last offered on Jan. 28, where the government raised a total of P40 billion, higher than the P35-billion plan.

Broken down, the BTr raised P15 billion as planned from the reissued seven-year papers at an average rate of 5.894%.

It also borrowed P25 billion from the then-new 25-year papers, higher than the P20-billion program, as the government opened its tap facility to take advantage of the strong demand for the tenor. The issue fetched a 6.375% coupon and an average rate of 6.334%. — A.M.C. Sy