Rates of Treasury bills, bonds to move sideways on inflation data

RATES of government securities may move sideways this week after inflation eased in January.

The Bureau of the Treasury will offer P15 billion in Treasury bills (T-bills) on Monday, or P5 billion each in 91-, 182- and 364-day securities.

On Tuesday, it will auction off P35 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 11 months.

A trader said T-bill yields may move sideways while the 10-year notes could range from 4.95% to 5.1%.

“While inflation clocked in lower, the expectation remains that the economic data will continue to evidence recovery,” the trader said in a Viber message.

“Also, the Fed (US Federal Reserve) is widely expected to hike rates in March and that local rate hikes may come in the second half of 2022.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill yields could either be steady or slightly lower this week after inflation decelerated.

“The maturity of more than P170 billion in Treasury bonds since the latter part of January 2022 added to the liquidity in the financial system,” he added.

Inflation slowed to 3% in January, the fifth straight month of deceleration, as housing and utilities prices eased, preliminary data from the Philippine Statistics Authority showed. This was slower than both the 3.2% in December and the 3.7% in January last year.

The Bangko Sentral ng Pilipinas (BSP) Monetary Board will meet to review its policy settings on Feb. 17. It has kept borrowing costs at record lows since November 2020.

BSP Governor Benjamin E. Diokno has said the central bank is unlikely to hike benchmark rates in the first half of this year as it waits for the economic recovery to become entrenched and unemployment to fall.

Meanwhile, the Fed earlier said it is likely to raise borrowing costs starting March to quell rising inflation. Markets expect the US central bank to fire off at least three rate hikes this year.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 0.7497%, 1.1249%, and 1.4394%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

On the other hand, the 10-year bond fetched a yield of 4.8805%.

The government raised P15 billion as planned via the T-bills it auctioned off last week.

Broken down, the Treasury raised P5 billion as programmed via the 91-day securities from P17.2 billion in bids. The average rate of the three-month debt papers went down by 0.2 basis point (bp) to 0.691% from 0.693% the previous week.

The government also borrowed P5 billion as planned through the 182-day instruments from P24 billion in tenders. The six-month T-bill’s average rate fell by 5.4 bps to 1.023% from 1.077% previously.

Lastly, the BTr made a full P5-billion award of the 364-day papers as bids reached P18.57 billion. The average yield on the one-year papers stood at 1.408%, down by 0.2 bp from 1.41% a week earlier.

Meanwhile, the last time the government offered the 10-year T-bonds to be auctioned off on Tuesday was on Jan. 18, where it raised P35 billion as planned as total tenders reached P72.24 billion. The debt papers fetched a coupon rate of 4.875%.

The Treasury plans to raise P200 billion from the domestic market in February, or P60 billion via T-bills and P140 billion from T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — Jenina P. Ibañez