Rates of T-bills, bonds seen to rise

RATES of government securities are expected to increase this week as Russia’s invasion of Ukraine continues to stoke global inflation pressures.

The Bureau of the Treasury (BTr) 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 nine months.

A trader said T-bill rates will likely go up by 5 to 10 basis points (bps) from the previous auction, while the 10-year bond’s yield could range from 5.8% to 6%.

“Market participants are still cautious given the forecasted trajectory of US Fed rate hikes and players continue to monitor the ongoing conflict between Russia and Ukraine,” the trader said via Viber.

“Onshore, the Bangko Sentral ng Pilipinas (BSP) said that inflation will likely breach target this year and that it is ready to respond should there be a buildup in inflation pressures.”

Another trader said via Viber that rates of government securities will likely move sideways with an upward bias as inflation pressures remain, especially with another round of local oil price hikes seen on Tuesday.

“Market will also wait for the Bureau of the Treasury’s borrowing schedule for April.”

The US central bank must move “expeditiously” to bring too-high inflation to heel, US Federal Reserve Chair Jerome H. Powell said last week, adding that it could use bigger-than-usual interest rate hikes if needed to do so, Reuters reported.

In particular, he added, “if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 bps at a meeting or meetings, we will do so.”

Fed policy makers this month raised interest rates for the first time in three years and signaled ongoing rate hikes ahead. Most of them see the short-term policy rate — pinned for two years near zero — at 1.9% by the end of this year, a pace that could be achieved with quarter-percentage-point increases at each of their next six policy meetings.

Meanwhile, the BSP Monetary Board kept benchmark interest rates at record lows during its meeting on Thursday, but said it could hike soon amid rising inflation risks amid the war between Russia and Ukraine.

The BSP now expects inflation to average 4.3% this year, above the 2-4% target and the previous 3.7% estimate.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.3212%, 1.5266%, and 1.7378%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the 10-year tenor fetched a yield of 5.7193%.

The government partially awarded the T-bills it offered last week as rates continued to rise on expectations of further rate hikes from the US Federal Reserve. The BTr raised just P13.9 billion via the short-term securities, or less than the programmed P15 billion.

Broken down, the Treasury awarded just P4.87 billion in 91-day T-bills versus the P5 billion on offer, even as total bids reached P9.47 billion. The average rate for the three-month T-bill climbed by 23.1 bps to 1.536% from the 1.305% fetched during the previous auction. 

The government also made a partial P4.03-billion award of 364-day papers versus the P5-billion offer even as bids totaled P7.7 billion. The average yield on the one-year paper went up by 5.8 bps to 1.792% from the 1.734% fetched previously.

On the other hand, the BTr borrowed P5 billion as planned via the 182-day T-bills that attracted P8.74 billion in tenders. The tenor fetched an average yield of 1.607%, up by 14.9 bps from the 1.458% seen previously.

Meanwhile, the last time the government offered the 10-year T-bonds to be auctioned off on Tuesday was on Feb. 8. The debt papers were awarded at an average rate of 5.093% at that auction, up by 21.8 bps from the 4.875% quoted when the series was first offered on Jan. 18.

The BTr wants to raise P250 billion from the domestic market this month, or P75 billion via T-bills and P175 billion from T-bonds. However, it has made several rejections and partial awards at its auctions due to rising yields.

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