By Aaron Michael C. Sy, Reporter
RATES OF TREASURY BILLS (T-bills) and Treasury bonds (T-bonds) to be auctioned this week are expected to move mixed as investors weigh dovish signals from the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve.
Debt yields might reflect the mixed movement in the secondary market amid dovish sentiment from both central banks, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.
“Expectations of further rate cuts by the BSP and the Fed could anchor yields, though profit taking may cap demand,” he said in a Viber message.
The Bureau of the Treasury (BTr) will sell P22 billion in T-bills on Monday — P7 billion in 91-day securities and P7.5 billion each in 182-day and 364-day debt. On Tuesday, it will sell P35 billion in reissued T-bonds across two tenors — P20 billion in 20-year debt with a remaining life of about seven years and P15 billion in 25-year bonds with 24 years and three months left to maturity.
BSP Governor Eli M. Remolona, Jr. earlier said the central bank’s “sweet spot” for its key rate could be closer to 4%, suggesting room for more cuts this year and in 2026.
The BSP has reduced policy rates by 175 basis points since it began its easing cycle in August 2024, including a surprise 25-bp cut earlier this month that brought the target repurchase rate to 4.75%, the lowest since September 2022.
On the secondary market on Oct. 17, yields on short-term securities moved unevenly. The 91-day T-bill rose marginally by 0.02 bp to 4.97%, while the 182- and 364-day tenors declined by 6 bps and 7.55 bps to 5.14% and 5.20%, based on PHP Bloomberg Valuation Service reference rates.
At the long end, the 20-year yield slipped by 0.36 bp to 6.41%, the 25-year by 0.13 bp to 6.4% and the seven-year, which approximates the remaining life of the reissued 20-year bond, fell by 3.84 bps to 5.81%.
A bond trader said the 20-year and 25-year debt could fetch average rates of 5.785%-5.815% and 6.45%-6.5%, respectively.
“Risk-off sentiment from the US could trigger more profit taking next week but should be met by bargain hunters amidst lack of bond supply and dovish sentiment,” the trader said.
Last week, the Treasury fully awarded P22 billion in T-bills amid strong demand, with total bids exceeding P97 billion — more than four times the offer.
The three-month paper fetched an average rate of 4.88%, down by 10.3 bps week on week. The six-month tenor was awarded at 5.072%, 5.6 bps lower, while the one-year bill eased by 10.9 bps to 5.119%.
Meanwhile, the 20-year bonds were last sold on Sept. 2 at an average rate of 5.939%, below the 6.75% coupon, while the 25-year securities were auctioned on Aug. 27 at an average of 6.374%, near their 6.375% coupon.
The BTr seeks to raise P180 billion from the domestic market this month — P110 billion via T-bills and P70 billion through Treasury 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.
