Rates of Treasury bills, bonds may move sideways this week

RATES of government securities on offer this week are expected to move sideways following a decline in secondary market yields due to lower oil prices.

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 five-year Treasury bonds (T-bonds) with a remaining life of four years.

A bond trader in a Viber message said T-bill rates are likely to move sideways from the previous auction, while the five-year bond could fetch an average yield ranging between 4.875% and 5%.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that rates could be steady or slightly lower week on week after secondary market yields declined.

“Two-year to six-year PHP Bloomberg Valuation (BVAL) yields similarly slightly lower by 0.01-0.03 [basis point (bp)] week on week, while eight-year to 30-year tenors were mostly slightly higher week on week.” he added.

Secondary market yields declined amid lower global oil prices due to a spike in coronavirus cases in China that caused a lockdown, as well as the release of oil reserves by the US and other countries, he said.

Mr. Ricafort said this also raised hopes of reduced inflationary pressures.

“The tax payment season typically for the month of April could also increase the National Government’s cash position and revenues, which would reduce the need for additional borrowings and somewhat help ease pressure on auction yields,” he added. The deadline for the filing income tax returns is on April 18 this year as the usual April 15 deadline falls on Good Friday.

Oil prices rose by 2% on Friday but notched their second straight weekly decline after countries announced plans to release crude oil from their strategic stocks, Reuters reported.

Brent crude settled up by $2.20 or 2.19% at $102.78 a barrel. US crude rose by $2.23 to $98.26.

Central banks around the world have been tightening their monetary policies to temper inflation despite continued risks to growth.

Headline inflation in March was at 4%, matching the upper end of the central bank’s 2-4% target. It was quicker than the 3% in February, showing the impact of the surge in oil prices caused by the Russia-Ukraine war.

BSP Governor Benjamin E. Diokno on Tuesday said they are ready to take preemptive action if inflation expectations become at risk or disanchored. He said March consumer price index data suggest inflation will likely be elevated in the coming months.

The central bank kept its benchmark rates untouched for the 11^th straight meeting last month. Mr. Diokno earlier said the policy rate could reach up to 2.75% by next year from the current 2%, which is a record low. 

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.3352%, 1.5165, and 1.7904%, respectively, based on the PHP BVAL Reference Rates published on the Philippine Dealing System’s website.

The government fully awarded the T-bills it offered last week after several weeks of rejections amid strong demand. Total tenders reached P54.59 billion, almost three times as much as the initial offer.

The government borrowed P5 billion as programmed via the 91-day T-bills at its auction last week as total tenders reached P29.35 billion. The average rate of the three-month debt dropped by 20.7 bps to 1.38% from the 1.587% seen last week.

The Treasury also raised P5 billion as planned from the 182-day securities as bids reached P14.17 billion. The average yield of the tenor went up by 17.4 bps to 1.781% from the 1.607% fetched previously.

Lastly, the BTr made a full P5-billion award of the 364-day T-bills as tenders reached P11.072 billion. The average rate of the one-year paper went up by 9.1 bps to 1.883% from the 1.792% fetched at the previous auction.

Meanwhile, the last time the reissued five-year bonds on offer on Tuesday were offered was on March 15, where the auction volume was partially awarded as investors asked for higher yields in anticipation of the US Federal Reserve’s rate hike.

The Treasury raised just P13.035 billion at that auction, less than the programmed P35 billion, even as the offering attracted P35.305 billion in bids.

The debt papers were awarded at an average rate of 4.669%, up by 58 bps from the 4.089% quoted when the series was last offered on Feb. 3.

The BTr plans to raise P200 billion from the domestic market this month, 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. — T.J. Tomas with Reuters