T-bill, bond rates to ease further

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be offered this week could continue to decline, although at a smaller magnitude compared to previous weeks amid expectations of slightly faster February inflation and price shock concerns after the United States and Israel attacked Iran.

The Bureau of the Treasury (BTr) will auction off P27 billion in T-bills on Monday, or P9 billion each in 91-, 182-, and 364-day papers.

On Tuesday, the government will offer P30 billion in reissued seven-year T-bonds with a remaining life of four years and 10 months.

T-bill and T-bond rates could drop further to mirror the marginal decrease seen for most tenors at the secondary market last week before the release of Philippine February inflation data on Thursday (March 5), which could show an uptick from January print, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Inflation concerns are also growing as the US and Israel’s move to launch attacks on Iran over the weekend could push up oil prices, Mr. Ricafort added.

Meanwhile, a trader said in an e-mail that the T-bond offer on Tuesday will likely be “well received,” with the papers likely to fetch yields from 5.525% to 5.55%.

“The government securities market traded flat on a lack of catalysts, and we saw fast money take profit from the previous days’ rally. Nonetheless, these were met by decent demand,” the trader said.

At the secondary market on Friday, yields on the 91- and 182-day Treasury bills T-bills went down by 0.07 basis point (bp) to 4.4312% and by 1.95 bps to 4.5242%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Feb. 27 published on the Philippine Dealing System’s website. Meanwhile, the 364-day tenor went up by 2.62 bps to yield 4.6208%.

The seven-year bond’s yield also dropped by 4 bps week on week to close at 5.7332%, while the five-year debt, the tenor closest to the remaining life of the issue on offer this week, also saw its rate go down by 4.7 bps to 5.5515%.

A BusinessWorld poll of 17 analysts yielded a median forecast of 2.4% for February inflation, which would be the fastest clip in 13 months or since the 2.9% in January 2025.

This would be faster than the 2% recorded in January and the 2.1% in February 2025 and would mark the straight month that inflation settled within the Bangko Sentral ng Pilipinas’ (BSP) 2%-4% annual target.

Still, this is close to the low end of the central bank’s 2.3%-3.1% forecast for the month.

Last week, the government raised P37.8 billion via the T-bills it auctioned off, higher than the P27-billion plan as the offering was over thrice oversubscribed, with total tenders reaching P96.82 billion. However, this was below the P142.15 billion in bids recorded in the previous week. 

Strong demand and lower rates prompted the Auction Committee to double its acceptance of noncompetitive bids for all tenors to P7.2 billion each.

Broken down, the government awarded P12.6 billion in 91-day T-bills, above the P9-billion plan, as demand for the tenor reached P36.35 billion. The three-month paper fetched an average rate of 4.24%, down by 11 bps from the yield seen in the previous week. Bids accepted had yields ranging from 4.204% to 4.264%.

The Treasury also borrowed P12.6 billion via the 182-day debt versus the P9-billion program as tenders hit P35.26 billion. The average rate of the six-month T-bill was at 4.357%, dropping by 7.6 bps. Tenders awarded carried rates from 4.288% to 4.4%.

Lastly, the BTr raised P12.6 billion from the 364-day securities, more than the P9-billion plan as bids totaled P25.21 billion. The one-year paper’s average yield was at 4.501%, inching down by 1.1 bps. Accepted bids had rates from 4.44% to 4.57%.

Meanwhile, the reissued seven-year bonds to be offered on Tuesday were last sold on Feb. 3, where the government raised P30 billion as planned during the auction proper and an additional P20 billion via its tap facility. The issue was quoted at an average rate of 5.557%, well below the previous award’s yield of 5.71% and the 6.125% coupon.

The Treasury is aiming to raise P248 billion from the domestic market this month, or P108 billion in T-bills and P140 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy