RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may climb as investors await the Bangko Sentral ng Pilipinas’ (BSP) policy meeting.
The Bureau of the Treasury (BTr) will auction off P20 billion in T-bills on Monday, or P6.5 billion each in 91- and 182-day papers and P7 billion in 364-day debt.
On Tuesday, the government will offer P30 billion in reissued 20-year T-bonds with a remaining life of six years and 11 months.
Yields on the T-bills and T-bonds on offer this week could track the week-on-week increase in secondary market rates, which came on the back of faster July inflation and in anticipation of the BSP’s review, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
A trader said in an e-mail that the T-bonds on offer this week could fetch yields ranging from 6.10% to 6.15% as the market widely expects the Monetary Board to begin its easing cycle on Thursday.
At the secondary market on Friday, the rates of the 91-day, 182- day, and 364-day T-bills went up by 5.58 basis points (bps), 4.13 bps, and 3.46 bps week on week to end at 5.8429%, 6.1056%, and 6.1977%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.
The 20-year bond’s rate inched up by 0.01 bp week on week to 6.1163%, while the seven-year debt, the tenor closest to the remaining life of the papers on offer this week, increased by 0.67 bp to yield 6.3206%.
Headline inflation accelerated to a nine-month high of 4.4% in July from 3.7% in June, the Philippine Statistics Authority reported last week. This was slower than the 4.7% print in the same month a year ago and was within the BSP’s 4%-4.8% forecast.
However, this was the fastest in nine months or since the 4.9% clip in October 2023 and also marked the first time since November that inflation exceeded the BSP’s 2-4% annual target.
The Monetary Board is now “a little bit less likely” to cut rates at its Aug. 15 policy meeting following the worse-than-expected July inflation print, BSP Governor Eli M. Remolona, Jr. said after the data release.
The Monetary Board has kept its policy rate at an over 17-year high of 6.5% since October 2023 following cumulative hikes worth 450 bps.
A BusinessWorld poll conducted last week showed that nine out of 16 analysts surveyed expect the Monetary Board to deliver a 25-bp rate cut at Thursday’s review.
This would bring the target reverse repurchase rate to 6.25% and would be the first reduction in benchmark borrowing costs since November 2020, or during the coronavirus pandemic.
The BTr wants to raise P220 billion from the domestic market this month, or P80 billion through T-bills and P140 billion via T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy
