Treasury bill, bond rates to rise further amid inflation concerns

RATES of government securities are expected to increase this week due to inflationary pressures caused by the Russian invasion of Ukraine.

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 seven-year Treasury bonds (T-bonds) with a remaining life of six years and four months.

A bond trader said via Viber that T-bill yields may inch up by 5 basis points (bps) this week, while the seven-year T-bond rates could range between 5.35% and 5.55%.

“The Fed rate hike was as expected, but the elephant in the room remains to be the ongoing conflict between Russia and Ukraine as this also impacts domestic inflation,” the trader said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said T-bill yields could continue to go up this week in line with a weekly rise in the secondary market.

He said the rate hike fired off by the US Federal Reserve last week has already been priced in by the market, along with Russia’s continued invasion of Ukraine, which had pushed up global oil and commodity prices.

The Fed last week raised rates by a quarter percentage point, the first time since 2018, to help combat rising inflation. It penciled in six more increases for the rest of 2022.

Global oil prices have been surging after the Feb. 24 Russian invasion of Ukraine, raising inflation concerns here and abroad.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.2005%, 1.4172%, and 1.7486%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bonds fetched a yield of 5.48%.

The government partially awarded the T-bills it offered last week as investors asked for higher rates due to rising oil prices and ahead of the Fed’s rate hike. The BTr raised just P9.14 billion via the short-term securities or less than the programmed P15 billion even as the offering attracted P23.35 billion in bids.

Broken down, the Treasury awarded just P3.04 billion in 91-day T-bills even as total bids reached P8.96 billion for the P5 billion on offer. The average rate for the three-month T-bill climbed by 40.6 bps to 1.305% from the 0.899% fetched during the previous auction.

The BTr also awarded only P3 billion in 182-day T-bills that attracted P7.22 billion in tenders versus the P5-billion program. The tenor fetched an average yield of 1.458%, up by 30.1 bps from the 1.157% seen previously.

The government likewise made a partial P3.1-billion award of the 364-day papers versus the P5-billion offer even as bids totaled P7.17 billion. The average yield on the one-year paper went up by 16.6 bps to 1.734% from the 1.568% fetched previously.

Meanwhile, the last time the government offered the seven-year T-bonds to be auctioned off on Tuesday was on Jan. 25, when it borrowed P35 billion as planned as total tenders reached P55.62 billion.

The debt papers were awarded at an average rate of 4.689%, up by 22.1 bps from the 4.468% quoted when the series was last awarded on Oct. 26.

The BTr plans to raise P250 billion from the domestic market this month, or P75 billion via T-bills and P175 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