Rates of T-bills, bonds likely to track secondary market levels

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could end mixed due to continued uncertainty over the Trump administration’s tariff plans.

The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P7 billion in 91-day securities, P8.5 billion in 182-day debt, and P9.5 billion in 364-day papers.

On Tuesday, the government will offer P25 billion in reissued 10-year T-bonds with a remaining life of nine years and nine months.

T-bill rates could follow the week-on-week declines seen at the secondary market and the 10-year bond’s rate could track the rise in US Treasury yields amid concerns about the impact of the US’ tariff policies on global growth, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This would support further US Federal Reserve rate cuts, he said, which would also give the Bangko Sentral ng Pilipinas (BSP) room to ease its own monetary stance further, consistent with recent dovish hints from BSP Governor Eli M. Remolona, Jr.

A trader added in an e-mail that the reissued 10-year bonds could fetch rates ranging from 6.235% to 6.275%, with “decent demand” likely as the tenor’s performance in the secondary market has been good.

US President Donald J. Trump on Saturday threatened to impose a 30% tariff on imports from Mexico and the European Union starting on Aug. 1, after weeks of negotiations with the major US trading partners failed to reach a comprehensive trade deal.

In an escalation of a trade war that has angered US allies and rattled investors, Mr. Trump announced the latest tariffs in separate letters to European Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum that were posted on his Truth Social media site on Saturday.

Mr. Trump sent similar letters to 23 other trading partners this week, including Canada, Japan and Brazil, setting blanket tariff rates ranging from 20% up to 50%, as well as a 50% tariff on copper.

The Aug. 1 deadline gives the targeted countries time to negotiate agreements that could lower the threatened tariffs. Some investors and economists have also noted Mr. Trump’s pattern of backing off his tariff threats.

The spate of letters showed Mr. Trump has returned to the aggressive trade posture that he took in April when he announced a slew of reciprocal tariffs against trading partners that sent markets tumbling before the White House delayed implementation.

Only “a couple” of officials at the US Federal Reserve’s June 17-18 meeting said they felt interest rates could be reduced as soon as this month, with most policymakers remaining worried about the inflationary pressure they expect to come from Mr. Trump’s use of tariffs to reshape global trade.

“Most participants” at the Fed’s meeting last month anticipated rate cuts would be appropriate later this year, with any price shock from tariffs expected to be “temporary or modest,” the minutes said. There was no indication that any policymaker felt the US central bank’s benchmark overnight rate, currently in the 4.25%-4.5% range, should be cut by several percentage points, as Mr. Trump wants.

Meanwhile, the BSP has reduced borrowing costs by a cumulative 125 bps since August last year. Mr. Remolona has said there is room for two more cuts this year amid moderating inflation.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills declined by 4.03 basis points (bps), 1.98 bps, and 1.65 bps week on week to end at 5.4305%, 5.6418%, and 5.6834%, respectively based on PHP Bloomberg Valuation Service Reference Rates data as of July 11 published on the Philippine Dealing System’s website.

For its part, the 10-year bond went up by 1.29 bps week on week to close at 6.246%.

Last week, the BTr raised P28.4 billion from the T-bills it auctioned off, above the P25-billion plan as the offer was more than thrice oversubscribed, with total bids reaching P87.486 billion.

The BTr sold P7 billion as planned in 91-day T-bills as total tenders reached P30.547 billion. The three-month paper was quoted at an average of 5.526%, steady from the previous auction, with bids accepted having yields of 5.515% to 5.535%.

Meanwhile, the government raised P11.9 billion from the 182-day securities, above the P8.5-billion program, as bids reached P33.685 billion. The average rate of the six-month T-bill was at 5.618%, rising by 1.1 bps from the previous week, with accepted yields at 5.593% to 5.625%.

The Treasury also raised P9.5 billion as programmed via the 364-day debt as demand hit P23.254 billion. The average rate of the one-year T-bill inched up by 0.5 bp to 5.656%. Accepted bids had yields of 5.65% to 5.665%.

Meanwhile, the BTr last offered the 10-year bonds to be auctioned off this week on June 17, where the government raised just P27.603 billion, below the P30-billion plan. The securities fetched an average rate of 6.428%, above the 6.375% coupon.

The BTr wants to raise P250 billion from the domestic market in July, or P125 billion through T-bills and P125 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — A.M.C. Sy with Reuters