RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could end mixed to track secondary market yield movements amid expectations of further cuts from the Bangko Sentral ng Pilipinas (BSP).
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion each in 91- and 182-day papers and P9 billion in 364-day securities.
On Tuesday, it will offer P30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of seven years and three months.
T-bill yields could be mixed or slightly lower, mirroring the week-on-week movements in comparable secondary market benchmarks, as slower May inflation data released last week bolstered bets of further monetary easing by the BSP as early as this month, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
Meanwhile, the reissued 10-year bonds on offer this week could also fetch rates close to secondary market levels, he added.
“We could expect a downward bias for yields on domestic bond issuances this week. This is mainly due to the latest Philippine inflation report, which continued to decline amid easing food prices,” a trader said in an e-mail.
“This report is likely to further solidify expectations of a potential policy rate cut from the Bangko Sentral ng Pilipinas. Both the anticipated policy rate cut and the softer inflation report are likely to push down yields both for the short-term and medium- to long-term bonds,” the trader added.
Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said that T-bill and T-bond yields could move sideways as the market looks ahead to the BSP’s widely expected 25-basis-point (bp) cut at its June 19 review.
At the secondary market, yields on the 91- and 182-day T-bills inched up by 0.83 bp and 1.29 bps week on week to 5.4413% and 5.6097%, respectively, based on the PHP Bloomberg Valuation Service Rates data as of June 5 published on the Philippine Dealing System’s website. Meanwhile, the 364-day debt dropped by 4.39 bps to end at 5.6814%.
For its part, the 10-year T-bond saw its rate go up by 4.28 bps week on week to end at 6.2997%, while the seven-year paper — the benchmark tenor closest to the remaining life of the bonds to be auctioned off on Tuesday — rose by 1.88 bps to yield 6.068%.
Philippine headline inflation slowed to an over five-year low of 1.3% in May from 1.4% in April and 3.9% the same month a year ago, the government reported on Thursday.
This matched the median estimate yielded in a BusinessWorld poll of 17 analysts and was within the BSP’s 0.9%-1.7% forecast for the month.
This also marked the fourth straight month of deceleration and tenth straight month of inflation settling within the central bank’s 2-4% annual target.
For the first five months, inflation averaged 1.9%.
Benign inflation could help justify further BSP rate cuts, with another reduction expected as early as this month’s meeting, analysts said.
BSP Governor Eli M. Remolona, Jr. last month said they are likely to deliver two more 25-bp rate cuts this year, with a reduction on the table at the Monetary Board’s June review.
The BSP in April reduced the target reverse repurchase rate by 25 bps to 5.5%, bringing total cuts thus far to 100 bps since it began its easing cycle in August last year.
Last week, the BTr raised P28.6 billion from the T-bills it auctioned off, higher than the P25-billion plan, as total bids reached P116.316 billion or almost five times the amount on offer.
Broken down, the Treasury borrowed the programmed P8 billion via the 91-day T-bills on Monday as tenders for the tenor reached P31.675 billion. The three-month paper was quoted at an average rate of 5.452%, 1.6 bps lower week on week. Tenders accepted by the BTr carried yields of 5.434% to 5.463%.
The government likewise made a full P8-billion award of the 182-day securities it auctioned off as bids for the paper amounted to P41.655 billion. The average rate of the six-month T-bill rose by 1.4 bps to 5.565%, with accepted rates ranging from 5.553% to 5.579%.
Lastly, the Treasury raised P12.6 billion via the 364-day debt papers, higher than the P9-billion program, as demand for the tenor totaled P42.986 billion. The average rate of the one-year T-bill slipped by 0.8 bp to 5.68%, with bids accepted having yields of 5.65% to 5.69%.
Meanwhile, the reissued 10-year bonds on offer on Tuesday were last offered on May 6, where the government raised P30 billion as planned at an average rate of 6.081%.
The BTr wants to raise P150 billion from the domestic market this month, or P60 billion through T-bills and P90 billion via T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.R.A. Inosante
