T-bill, bond rates may be mixed

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could be mixed before the release of March inflation data that could show an uptick due to the oil price shock caused by the conflict in the Middle East.

The Bureau of the Treasury (BTr) will auction off P27 billion in T-bills on Monday, or P9 billion each in 91-, 182-, and 364-day papers.

On Tuesday, the government is targeting to raise up to P40 billion from a dual-tenor T-bond offering, or P20 billion to P30 billion each via reissued seven year T-bonds with a remaining life of three years and one month and reissued 25-year securities with a remaining life of eight years and seven months.

T-bill and T-bond auction rates could mirror the mixed week-on-week yield movements seen at the secondary market as headline inflation likely accelerated sharply last month amid higher energy prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A trader said secondary market rates were mostly lower on Wednesday as a new month began and amid hopes for a de-escalation in the conflict involving the United States, Israel and Iran.

However, signals from all sides remain mixed, raising doubts on a near-term resolution.

Higher oil prices due to fuel trade disruptions amid the Middle East war and rising rice costs may have pushed Philippine inflation to its fastest pace in nearly two years, analysts said.

A BusinessWorld poll of 18 analysts yielded a median estimate of 3.8% for the March consumer price index, faster than the 2.4% in February and 1.8% a year ago.

This is near the upper end of Bangko Sentral ng Pilipinas’ (BSP) 3.1%-3.9% forecast for the month and its 2%-4% annual target.  The print would also be the quickest in 20 months or since the 4.4% seen in July 2024.

This would also mark the third straight month that inflation settled within the central bank’s target.

At the secondary market on Wednesday, yields on the 91- and 182-day T-bills rose by 0.42 basis point (bp) and 5.58 bps week on week to end at 4.9897% and 5.1253%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of April 1 published on the Philippine Dealing System’s website. Meanwhile, the 364-day paper went down by 1.02 bps to close at 5.1803%.

For its part, the seven-year tenor fell by 12.28 bps week on week to yield 6.7919%, while the three-year bond, the closest to the remaining life of the shorter bonds on offer, eased by 7.53 bps to 6.2524%.

Meanwhile, the 25-year T-bond’s yield went up by 1.27 bps to 7.0168%, while the 10-year paper, the benchmark closest to the remaining life of the debt on auction, declined by 18.86 bps week on week to 6.8308%.

On March 23, the BTr raised only P19.2 billion via the T-bills it auctioned off, below the P27-billion program even as total tenders reached P36.78 billion.

Broken down, the government borrowed P9 billion as planned through the 91-day T-bills as demand for the tenor reached P16.613 billion. The three-month paper fetched an average rate of 5.004%, climbing by 10.4 bps from the yield seen in the prior week. Bids accepted had yields ranging from 4.945% to 5.004%.

The Treasury likewise raised the programmed P9 billion via the 182-day debt as tenders reached P13.83 billion. The average rate of the six-month T-bill was at 5.032%, rising by 8.4 bps from the previous auction. Tenders awarded carried rates from 4.999% to 5.125%.

Meanwhile, the BTr raised just P3.705 billion from the 364-day securities, below the P9-billion plan as bids totaled just P6.305 billion. The one-year paper’s average yield was at 5.166%, up by 10 bps week on week. Accepted bids had rates from 5.1% to 5.25%.

Meanwhile, the reissued seven-year T-bonds on offer this week were last awarded on Nov. 26, 2024, where the government raised P15 billion as planned at an average rate of 5.954%, below the 6.5% coupon rate. The papers were also auctioned off on March 24, but all bids were rejected by the Treasury.

On the other hand, the reissued 25-year notes up for auction this week were last sold on Dec. 9, 2022, where the government raised P35 billion as planned at an average rate of 7.189%, below the 9.25% coupon rate.

For April, the government is looking to raise P248 billion from the domestic market, or P140 billion via T-bills and P108 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy