Rates of Treasury bills, bonds may climb on inflation worries

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be offered this week could end mostly higher on growing inflation risks as global oil prices remain elevated due to dimming prospects of a definitive end to the Middle East war.

The Bureau of the Treasury (BTr) will auction off 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 up to P50 billion from a dual-tenor T-bond offering, or P20 billion to P30 billion from reissued seven-year T-bonds with a remaining life of three years and five months, and P10 billion to P20 billion in 20-year notes with a remaining life of 18 years and 21 days.

T-bill and T-bond rates could rise this week, mirroring the broad increase seen in secondary market yields, due to expectations of faster inflation due to soaring global crude oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Government securities continued to grind higher … amid escalating tensions in the Middle East. Yields initially traded 10 bps higher at the open but ended with some bargain hunting,” a trader said in an e-mail.

At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills rose by 7.48 basis points (bps), 9.7 bps, and 15.6 bps week on week to end at 4.6217%, 4.7602%, and 5.2143%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of April 30 published on the Philippine Dealing System’s website.

For its part, the rate of the seven-year bond jumped by 24.08 bps week on week to 6.9507%, while the three-year debt, the benchmark tenor closest to the remaining life of the papers on offer this week, surged by 31 bps to yield 6.446%.

Meanwhile, the yield on the 20-year note inched down by 3.2 bps to end at 6.9082%.

A BusinessWorld poll of 17 analysts yielded a median estimate of 5.5% for the April consumer price index.

If realized, this would be faster than the 4.1% in March and 1.4% in April 2025. It would also be the fastest in over two years or since the 6.1% in September 2023.

This would also mark the second straight month that inflation settled above the central bank’s 2%-4% target. However, this is below the Bangko Sentral ng Pilipinas’ 5.6%-6.4% forecast for the month.

The Philippine Statistics Authority is scheduled to release April inflation data on Tuesday (May 5).

US President Donald J. Trump said on Saturday he had been told about the concept of a deal with Iran, but was waiting for the exact wording, while warning there was still the possibility of restarting strikes on the country if Tehran misbehaves, Reuters reported.

A senior Iranian official said on Saturday that an Iranian proposal so far rejected by Mr. Trump would open shipping in the Strait of Hormuz and end the US blockade of Iran while leaving talks on Iran’s nuclear program for later.

Reuters and other news organizations reported over the past week that Tehran was proposing to reopen the strait before nuclear issues were resolved. The official confirmed that this new timeline had now been spelled out in a formal proposal conveyed to the United States through mediators.

Iran has been blocking nearly all shipping from the Gulf apart from its own for more than two months. Last month, the US imposed its own blockade of ships from Iranian ports.

Global oil prices eased on Friday following news of the Iranian proposal, coming off Thursday’s four-year high. Benchmark Brent crude was down 1% to around $109.

Last week, the Treasury raised P37.646 billion via the T-bills it auctioned off, above the P30-billion plan as total tenders reached P73.491 billion or more than twice the amount on offer.

Strong demand for the 91-day and 182-day papers prompted the Auction Committee to double its acceptance of noncompetitive bids for these tenors to P9.6 billion and P7.2 billion, respectively, the BTr said in a statement.

Broken down, the Treasury raised P16.8 billion via the 91-day T-bills, above the P12 billion it placed on the auction block as demand for the tenor reached P36.945 billion. The three-month paper fetched an average rate of 4.558%, inching down by 1.6 bps from the previous week. Bids accepted had yields ranging from 4.5% to 4.635%.

For the 182-day debt, the government borrowed P12.6 billion, higher than the P9-billion offering as tenders reached P23.15 billion. The average rate of the six-month T-bill was at 4.737%, rising by 8.8 bps from the last auction. Tenders awarded carried rates from 4.675% to 4.849%.

Meanwhile, the BTr sold only P8.246 billion in 364-day securities, below the P9 billion on offer even as bids totaled P13.396 billion. The one-year paper fetched an average yield of 5.184%, increasing by 13.2 bps. Accepted bids had rates from 4.95% to 5.097%.

For its part, the reissued seven-year bonds to be auctioned off on Tuesday were last offered on Nov. 29, 2023, where the government raised P20 billion as planned at an average rate of 6.099%, below the 7% coupon rate.

The 20-year T-bonds were last sold on Jan. 27, where the government borrowed P11.599 billion out of the P20-billion plan at an average rate of 6.572%, below the 6.875% coupon rate.

The Treasury aims to raise P268 billion from the domestic market this month, or P128 billion in T-bills and P140 billion in 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. — A.M.C. Sy with Reuters