T-bill, bond rates may end mixed before inflation data

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week could track secondary market yields before the release of March inflation data, which could affect the Bangko Sentral ng Pilipinas’ (BSP) policy decision next month.

The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion each in 91- and 182-day papers and P9 billion in 364-day papers.

On Wednesday, the government will offer P30 billion in reissued seven-year T-bonds with a remaining life of five years and three months. This week’s T-bond auction was moved from the usual Tuesday schedule due to the Eid’l Fitr holiday.

Rates of the government securities on offer this week could mirror the mixed yield movements at the secondary market last week, 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 rose by 12.09 basis points (bps), 9.05 bps, and 8.86 bps week on week to end at 5.2978%, 5.6163% and 5.7763%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of March 28 published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bond’s rate went down by 6.3 bps week on week to close at 6.0353%. The five-year debt, the benchmark tenor closest to the remaining life of the papers on offer on Wednesday, also declined by 6.3 bps week on week to yield 5.9001%.

Yields at the secondary market ended mixed amid expectations of a BSP rate cut as early as next month, Mr. Ricafort said.

The market is awaiting the release of the March inflation report as this could dictate the central bank’s next move, he added.

BSP Governor Eli M. Remolona, Jr. last week said that there is a “good chance” that the Monetary Board will cut rates by 25 bps at their April 10 meeting, Bloomberg reported.

Mr. Remolona said the BSP remains on an easing cycle and could reduce borrowing costs by as much as 75 bps this year depending on data.

The central bank has brought down benchmark interest rates by a total of 75 bps since it began its rate-cut cycle in August last year, with its policy rate currently at 5.75%.

The Monetary Board in February unexpectedly kept rates unchanged amid uncertainties stemming from the Trump administration’s policies.

The Philippine Statistics Authority will release March consumer price index (CPI) data on April 4 (Friday).

Headline inflation may have eased slightly in March amid lower prices, analysts said. A BusinessWorld poll of 18 analysts yielded a median estimate of 2% for the March CPI.

If realized, this would be a tad slower than the 2.1% in February and the 3.7% clip in the same month a year ago. This would also be the lowest monthly inflation in six months or since the 1.9% print in September.

Mr. Ricafort added that secondary market yields last week were also affected by the latest cut in banks’ reserve requirement ratios, which took effect on Friday and infused about P330 billion into the financial system. Traders said the excess liquidity was mostly placed in debt instruments at the front end of the curve.

Last week, the BTr raised P28 billion from the T-bills it auctioned off, higher than the original P22-billion plan, as total bids reached P67.88 billion, more than twice as much as the amount on offer.

Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as tenders for the tenor reached P18.825 billion. The three-month paper was quoted at an average rate of 5.157%, rising by 3.9 bps from the previous auction. Tenders accepted by the BTr carried yields of 5.14% to 5.179%.

Meanwhile, the government made a P9.8-billion award of the 182-day securities, above the P7-billion program, as bids for the paper amounted to P19.925 billion. The average rate of the six-month T-bill was at 5.554%, 5.8 bps higher than the previous week, with accepted rates ranging from 5.488% to 5.599%.

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 P29.13 billion. The average rate of the one-year debt inched down by 1.6 bps to 5.681%, with bids accepted having yields of 5.673% to 5.697%.

Meanwhile, the T-bonds on offer on Wednesday were last auctioned off on March 4, where the government raised P30 billion as planned at an average rate of 6.019%, lower than the 6.375% coupon.

The Treasury is looking to raise P245 billion from the domestic market this month, or P125 billion via T-bills and P120 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy