Rates of T-bills, bonds may rise

RATES of government securities are expected to increase this week ahead of the US Federal Reserve’s planned tightening.

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 fresh seven-year Treasury bonds (T-bonds).

“We expect steady to upward bias as FOMC (US Federal Open Market Committee) gears for [a] rate hike,” a bond trader said via Viber.

The trader added that US inflation data will be released this week, “which may put players on edge.”

“Locally, local pump prices may continue to rise and may affect inflation expectations.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that T-bill and T-bond yields could continue to increase in line with the weekly rise seen in secondary market rates.

“T-bill auction yields could go up by less than 0.05 [basis point (bp)] week on week,” he said. This is smaller than the hike last week, he added, in view of the rejected bids on Monday’s T-bill auction.

US Federal Reserve Chairman Jerome H. Powell last week said Russia’s invasion of Ukraine has not changed the central bank’s plans to start raising interest rates this month, Reuters reported.

US inflation rose by 7.5% in January, the highest increase in four decades.

In the Philippines, inflation was at 3% for the second consecutive month in February, easing from the 4.2% a year earlier.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said increasing global crude oil prices amid the Russia-Ukraine conflict are causing uncertainty.

Brent crude surged over $100 per barrel for the first time since 2014 after Russia invaded Ukraine on Feb. 24.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.1685%, 1.2493%, and 1.5943%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bonds fetched a yield of 5.1329%.

The BTr rejected all tenders for its offers of T-bills and T-bonds last week amid rising rates.

Bids for the T-bills the government offered last week were at P18.54 billion versus the BTr’s plan to raise P15 billion. Tenders for the short-term papers were rejected even as the offer was oversubscribed as investors asked for higher rates.

Broken down, bids for the 91-day securities reached P6.07 billion, higher than the P5-billion plan. Had the Treasury made a full award, the three-month debt papers would have fetched an average rate of 1.49%, up by 59.1 bps from the 0.899% seen the previous week.

The BTr also rejected the P5.65 billion in tenders for the 182-day securities, which was higher than the programmed P5 billion. The average rate of the six-month T-bill would have gone up by 57.9 bps to 1.736% from 1.157% previously had the government made a full award.

Lastly, the government turned down P6.82 billion in bids for the 364-day debt papers from an initial offer of P5 billion. If the tenor was fully awarded, the average yield on the one-year instrument would have stood at 1.865%, up by 29.7 bps from the 1.568% fetched a week earlier.

The BTr plans to raise P250 billion from the domestic market this month, or P75 billion via T-bills and P175 billion from T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — Jenina P. Ibañez with Reuters