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T-bill, RTB rates to track secondary market yields


RATES of the Treasury bills (T-bills) and retail bonds on offer this week could track secondary market levels on expectations of ample demand from the market and ahead of the release of January inflation data.

The Bureau of the Treasury (BTr) will auction off P15 billion in T-bills on Monday, made up of P5 billion each in 91-, 182-, and 364-day papers.

Meanwhile, the government will hold the rate-setting auction for its offer of 5.5-year retail Treasury bonds (RTBs) on Tuesday, from which it is looking to raise at least P30 billion.

The offer period for the RTBs is from Feb. 7-17, unless adjusted by the BTr. The offering also includes a swap component for some papers maturing this year.

The BTr’s auction of five-year Treasury bonds (T-bonds) initially scheduled for Tuesday was canceled due to the RTB offer.

“The upcoming Treasury bill auction results could again slightly ease week on week, in view of the continued slightly week-on-week correction in short-term PHP BVAL (Bloomberg Valuation Service) yields,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Meanwhile, for the RTBs, Mr. Ricafort said the paper could fetch a coupon rate of 5.7% to 5.8%, also tracking secondary market yields.

At the secondary market on Friday, the rate of the 91-, 182-, and 364-day papers dropped by 9.89 basis points (bps), 5.28 bps, and 8.97 bps week on week to 4.2768%, 4.9007%, and 5.305%, respectively, based on the PHP BVAL Reference Rates published on the Philippine Dealing System’s website. Meanwhile, the five-year bonds were quoted at 5.823% on Friday.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a report that the consumer price index (CPI) report for January “would give risk appetite another shot in the arm after the dovish FOMC (Federal Open Market Committee) meeting last week.”

“The market expects an inflation south of 8% year on year that would initiate the much-anticipated disinflation process,” Mr. Asuncion added.

The US Federal Reserve hiked borrowing costs by 25 bps at its meeting on Jan. 31 to Feb. 1, bringing the fed funds rate to a 4.5% to 4.75% range.

The US central bank has now hiked rates by 450 bps since March 2022.

Meanwhile, a BusinessWorld poll of 15 economists last week yielded a median estimate of 7.6% for January headline inflation, close to the lower end of the 7.5% to 8.3% forecast given by the Bangko Sentral ng Pilipinas.

If realized, this will be slower than the 14-year high of 8.1% in December 2022 but faster than the 3% print seen in January 2022 and the central bank’s 2-4% target.

“Yields are still relatively attractive amid the view of easing inflation for the coming months that could support further normalization of bond yields, which are fundamentally determined by the inflation prospects,” Mr. Ricafort said.

Meanwhile, a trader said in a Viber message that the T-bill yields could remain steady as the offer volume is the same, while the RTB could see strong demand if the coupon fetched is above 6%. 

Last week, the BTr raised P15 billion as planned from the T-bills it auctioned off as bids reached P62.12 billion, more than four times the amount on offer.

Broken down, the Treasury raised P5 billion as programmed via the 91-day T-bills, with tenders reaching P16.58 billion. The average rate of the three-month papers dropped by 8.1 bps to 4.152%, with accepted rates ranging from 4.13% to 4.163%.

The government also made a full P5-billion award of the 182-day securities as bids for the papers reached P17 billion. The six-month tenor was quoted at an average rate of 4.875%, declining by 3.7 bps, with accepted rates at 4.858% to 4.888%.

Lastly, the BTr borrowed P5 billion as planned from the 364-day debt papers as demand for the tenor reached P28.27 billion. The average rate of the one-year T-bill inched fell by 7.4 bps to 5.354%. Accepted yields were from 5.33% to 5.367%.

The Treasury wants to raise P200 billion from the domestic market this month, or P60 billion through T-bills and P140 billion via T-bonds. However, with Tuesday’s P35-billion bond offer canceled to give way to the RTB auction, the February program for T-bonds is now at just P105 billion.

The government borrows from domestic and external sources to finance its budget deficit, which is capped at P1.47 trillion this year or 6.1% of gross domestic product. — Aaron Michael C. Sy

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