Yields on Treasury bills, bonds may end mixed

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week may end mixed to mirror secondary market movements following the slower-than-expected March Philippine inflation print and market caution due to the Trump administration’s tariff announcement.

The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday, or P7 billion each in 90- and 181-day papers and P8 billion in 363-day papers. The T-bill tenors were adjusted as the issue date was pushed back by a day due to a holiday.

On Tuesday, the government will offer P35 billion in reissued 20-year T-bonds with a remaining life of six years and three months.

Rates for T-bills and bonds to be offered this week may track the mixed movements at the secondary market, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A trader said the reissued T-bonds to be auctioned off on Tuesday could fetch rates ranging from 5.875% to 5.925%, with demand expected to be good.

At the secondary market on Friday, the 91- and 182-day T-bills rose by 4.76 basis points (bps) and 6.56 bps week on week to end at 5.3454%, and 5.6819%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of March 28 published on the Philippine Dealing System’s website. Meanwhile, the 364-day paper’s yield went down by 2.8 bps to 5.7735%

On the other hand, the 20-year bond went down by 0.15 bp week on week to fetch 6.3165%, while the seven-year debt, the tenor closest to the remaining life of the bond issue to be offered on Tuesday, declined by 8.64 bps to 5.9489%.

Secondary market yields were affected by the latest domestic inflation data as well as concerns over the Trump administration’s latest tariff announcement.

Inflation eased to its lowest annual rate in nearly five years in March as food and transport costs rose at a slower pace, the government reported on Friday.

The consumer price index slowed to 1.8% in March from the 2.1% in February and 3.7% in the same month a year ago, preliminary data from the Philippine Statistics Authority showed.

This was within the Bangko Sentral ng Pilipinas’ (BSP) 1.7%-2.5% forecast for the month and below the 2% median estimate in a BusinessWorld poll of 18 analysts.

The March print was also the lowest in 58 months or since the 1.6% logged in May 2020 at the height of the coronavirus pandemic.

For the first quarter, inflation averaged 2.2%, within the central bank’s 2-4% annual target.

Analysts said the slower March inflation print could give the Monetary Board a reason to resume its easing cycle when it meets on Thursday.

Meanwhile, US President Donald J. Trump unveiled sweeping tariffs on Wednesday, causing investors to flee to the safety of government bonds, Reuters reported.

Mr. Trump slapped a 10% tariff on most US imports and much higher levies on dozens of countries, erecting the steepest trade barriers in more than 100 years.

US Federal Reserve Chair Jerome H. Powell said in remarks at a business journalists’ conference in Arlington, Virginia, that Trump’s new tariffs are “larger than expected” and the economic fallout, including higher inflation and slower growth, likely will be as well.

After years of huge flows into US stocks and a booming American economy, investors are grappling with where to put their cash.

That helped drive a powerful rush towards government bond markets. The yield on the benchmark US 10-year Treasury note fell 12.2 basis points to 3.933% after falling to a six-month low of 3.86%. Yields move inversely to prices.

Last week, the BTr raised P24.15 billion from its offering of T-bills, short of the P25-billion plan, even as total bids reached P45.667 billion, almost twice the amount on offer.

Broken down, the Treasury borrowed only P7.15 billion via the 91-day T-bills, lower than the P8-billion program, even as tenders for the tenor reached P12.335 billion. The three-month paper was quoted at an average rate of 5.307%, rising by 15 bps from the previous auction. Tenders accepted by the BTr carried yields of 5.148% to 5.379%.

Meanwhile, the government made a full P8-billion award of the 182-day securities as bids for the paper amounted to P17 billion. The average rate of the six-month T-bill was at 5.646%, 9.2 bps higher, with accepted rates ranging from 5.5% to 5.749%.

The Treasury also raised P9 billion as planned via the 364-day debt papers as demand for the tenor totaled P16.332 billion. The average rate of the one-year debt rose by 6.7 bps to 5.748%, with bids accepted having yields of 5.64% to 5.788%.

Meanwhile, the T-bonds to be auctioned off on Tuesday were last offered on Aug. 13, 2024, where the government raised P30 billion as planned at an average rate of 6.128%.

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 this year. — A.M.C. Sy with Reuters