RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week could end mixed, with yields on longer tenors expected to rise due to lingering uncertainties overseas.
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 P20 billion in reissued 20-year T-bonds with a remaining life of 18 years and 10 months.
T-bill and T-bond yields may track the week-on-week movements in the rates of their comparable secondary market benchmarks, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The upcoming Treasury bill auction yields could be mixed after most short-term PHP BVAL (Bloomberg Valuation Service) yields were mostly slightly higher,” Mr. Ricafort said.
“The upcoming 20-year Treasury bond could be similar to the 20-year PHP BVAL yield, slightly higher week on week, … amid relatively higher comparable US Treasury yields recently after US President Donald J. Trump signed into law his $3.4-trillion fiscal package. The comparable 20-year US Treasury yield hovered among one-month highs recently at 4.95%,” he added.
A trader said in an e-mail that Tuesday’s offering of reissued 20-year bonds could be “well received” and fetch rates ranging from 6.575% to 6.625%.
At the secondary market on Friday, the 91-day T-bill went down by 4.02 basis points (bps) week on week to end at 5.4104%, based on PHP BVAL Reference Rates data as of July 25 published on the Philippine Dealing System’s website. Meanwhile, the 182- and 364-day T-bills increased by 1.06 bps and 2.22 bps to fetch 5.5817% and 5.68%, respectively.
For its part, the 20-year bond saw its yield rise by 3.48 bps week on week to end at 6.569%.
On Friday, US Treasury yields drifted higher in a subdued trading as investors braced for a data-heavy week, updates on US trade talks, and a Federal Reserve policy meeting, Reuters reported.
The yield on benchmark US 10-year notes fell 2.4 bps to 4.384% from 4.408% late on Thursday.
The 30-year bond yield fell 2.3 bps to 4.9265% from 4.949% late on Thursday.
The 2-year note’s yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1 bps to 3.915% from 3.925% late on Thursday.
The Fed is expected to convene this week for a two-day monetary policy meeting, which is expected to culminate in a decision to let its federal funds target rate stand in the 4.25% to 4.50% range. The meeting comes at a moment in which Fed Chair Jerome H. Powell is facing criticism from US President Donald J. Trump for not cutting rates.
Meanwhile, the nonpartisan Congressional Budget Office has estimated that the One Big Beautiful Bill’s tax cuts and spending provisions would add $3.4 trillion to the US’ $36.2-trillion debt and only increase inflation-adjusted gross domestic product by an average of 0.5% over 10 years.
Last week, the government raised P28.4 billion from the T-bills it auctioned off, higher than the P25-billion plan, as the offer was almost four times oversubscribed, with total bids reaching P92.163 billion.
Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as total tenders for the tenor reached P35.648 billion. The three-month paper was quoted at an average rate of 5.422%, down by 5.3 bps from the previous auction, with bids accepted having rates of 5.39% to 5.422%.
Meanwhile, the government raised P11.9 billion from the 182-day securities, higher than the P8.5-billion program, as bids amounted to P27.14 billion. The six-month T-bill’s average rate inched down by 0.9 bp at 5.566%, slipping by 0.9 bp from the previous week, with accepted yields ranging from 5.55% to 5.574%.
Lastly, the Treasury sold P9.5 billion via the 364-day debt papers as programmed as demand for the tenor totaled P29.375 billion. The average rate of the one-year T-bill inched down by 1.9 bps to 5.631%. Accepted bids carried rates ranging from 5.6% to 5.649%.
Meanwhile, the reissued 20-year bonds to be offered on Tuesday were last auctioned off on May 15, where the government raised P25 billion as planned at an average rate of 6.486%, below the 6.875% coupon.
The BTr wants to raise P250 billion from the domestic market this month, 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
