RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could go down on monetary easing bets and as demand returns to normal following the end of the government’s public offering of five-year retail Treasury bonds (RTB).
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion in 91-day and 182-day securities, and P9 billion in 364-day papers.
On Tuesday, the government will offer P25 billion in reissued 10-year T-bonds with a remaining life of nine years and eight months.
T-bill and T-bond yields could decline this week, mirroring the week-on-week decline seen at the secondary market, following dovish signals from the central bank chief, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The markets have been anticipating a possible 25-basis-point (bp) Bangko Sentral ng Pilipinas (BSP) rate cut as early as the next rate-setting meeting on Aug. 28, as supported by benign inflation recently,” Mr. Ricafort said.
Investors are also pricing in a possible 25-bp reduction from the US Federal Reserve in September, he added.
A trader said in an e-mail that the reissued 10-year bonds to be offered this week could see good reception and fetch rates ranging from 6% to 6.075%, broadly in line with secondary market levels.
At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills went down by 7.83 bps, 5.09 bps, and 0.65 bp week on week to close at 5.2921%, 5.5066%, and 5.6592%, respectively, according to PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.
The 10-year bond’s rate also declined by 5.91 bps week on week to end at 6.0657%.
Last week, BSP Governor Eli M. Remolona, Jr. said a rate cut is “quite likely” at the Monetary Board’s next meeting on Aug. 28 as inflation is likely to settle within its annual target.
The central bank has so far lowered borrowing costs by a total of 125 bps since it began its easing cycle in August last year to bring the benchmark rate to 5.25%.
Mr. Remolona said they are expecting to deliver two more rate cuts this year. However, he noted that the possibility of three rate cuts is “unlikely.”
After the Aug. 28 meeting, the BSP will have two more policy meetings before the end of 2025.
Philippine headline inflation slowed to a near six-year low of 0.9% in July, marking the fifth straight month that inflation settled below the central bank’s 2-4% target range.
For the first seven months of the year, inflation averaged 1.7%.
Mr. Ricafort added that the closure of the government’s RTB offer on Friday, which temporarily affected market liquidity, as well as a recent bond maturity could lead to better demand and lower yields this week.
The government raised an initial P210 billion from its offer of five-year RTBs at the rate-setting auction held on Aug. 5, with tenders reaching P354.175 billion.
The notes are priced at 6% per annum, payable quarterly.
The public offer period ran from Aug. 5 to 15, while settlement is on Aug. 20.
The government has not announced the final issue size for its latest tranche of retail bonds. National Treasurer Sharon P. Almanza earlier said the government is aiming to raise P300 billion in fresh funds from the RTBs, excluding the volume generated through the bond exchange offer program.
Last week, the government raised P25 billion as planned from the T-bills it auctioned off as the offer was almost four times oversubscribed, with total bids reaching P94.926 billion.
Broken down, the Treasury borrowed P8 billion as planned via the 91-day T-bills as total tenders for the tenor reached P30.47 billion. The three-month paper was quoted at an average rate of 5.287%, down by 3.1 bps from the previous auction. Yields accepted ranged from 5.21% to 5.318%.
The government also raised P8 billion as programmed from the 182-day securities as tenders amounted to P33.45 billion. The average rate of the six-month T-bill was at 5.506%, declining by 2.9 bps, with accepted yields ranging from 5.448% to 5.533%.
Lastly, the Treasury sold the planned P9 billion in 364-day debt as demand for the tenor totaled P31.006 billion. The average rate of the one-year T-bill dropped by 2.5 bps to 5.612%. Tenders accepted carried rates ranging from 5.6% to 5.638%.
Meanwhile, the reissued 10-year bonds on offer on Tuesday were last auctioned off on July 15, where the BTr raised P25 billion as planned at an average rate of 6.285%, below the 6.375% coupon.
The Treasury is looking to raise P185 billion from the domestic market this month, or P125 billion through T-bills and P60 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. — Aaron Michael C. Sy
