T-bill, bond rates may be mixed as market awaits BSP decision

YIELDS on Treasury bill (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week could be mixed as players look ahead to the Bangko Sentral ng Pilipinas’ (BSP) policy decision, with some already expecting a rate hike as the global oil shock stokes domestic inflation concerns.

The Bureau of the Treasury (BTr) will offer up to P36 billion in T-bills on Monday, or P9 billion to P12 billion each in 91-, 182-, and 364-day papers.

On Tuesday, the government is targeting to raise P20 billion to P30 billion from reissued 10-year T-bonds with a remaining life of seven years and three months.

T-bill and T-bond rates could mirror the mixed week-on-week movements in secondary market yields as traders priced in developments in the Middle East conflict and their resulting effect on global oil prices, and their bets for the BSP’s policy decision on Thursday (April 23), Rizal Commercial banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Demand for the T-bonds on offer could be weak, with the papers likely to fetch rates ranging from 6.6% to 6.7% and providing “good opportunities for investment books,” a trader said in an e-mail.

The trader added that the market now expects the BSP to raise rates this week, which would mean some bullish bets if it ends up adopting a wait-and-see stance instead.

At the secondary market on Friday, yields on shorter tenors went down while those on longer debt rose, reflecting cautious sentiment over the Iran war and its impact on the Philippine economy.

Rates of the 91-, 182-, and 364-day T-bills went down by 14.16 basis points (bps), 20.61 bps, and 6.22 bps week on week to end at 4.6183%, 4.708%, and 5.0969%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of April 17 published on the Philippine Dealing System’s website.

Meanwhile, the yield on the 10-year bond went up by 6.24 bps week on week to 6.6604%, while the seven-year debt, the tenor closest to the remaining life of the papers to be sold on Tuesday, saw its rate drop by 3.54 bps to 6.5568%.

A BusinessWorld poll showed that 11 out of 19 analysts expect the Monetary Board to hike its target reverse repurchase rate by 25 bps to 4.5% this week, which would mark the first increase since October 2023.

BSP Governor Eli M. Remolona, Jr. told BusinessWorld on the sidelines of the International Monetary Fund and World Bank’s 2026 Spring Meetings last week that the central bank has room to tighten to quell rising inflation amid the Middle East conflict as they expect government spending to support growth.

He said second-round effects may emerge sooner than expected as the oil shock is expected to spill over into domestic food and transport costs. In March, elevated oil prices due to the war drove inflation to a near two-year high of 4.1%, faster than the BSP’s 3.1%-3.9% forecast and 2%-4% target for the year.

Last week, the Treasury raised P32.06 billion via the T-bills it auctioned off, above its P30-billion program as total tenders reached P99.425 billion or more than thrice the amount on offer. Yields went down across all tenors, even as awards were mixed.

Meanwhile, the reissued 10-year bonds on offer on Tuesday were last sold on March 10, where the government raised only P9.451 billion, below the P20-billion to P30-billion plan. The issue fetched an average rate of 6.473%, above the 6.625% coupon rate.

The Treasury wants to borrow up to P248 billion from the domestic market this month, or P140 billion via T-bills and P108 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.61 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy