T-bill, bond rates may be mixed as BSP signals more hikes ahead

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week could be mixed after the Bangko Sentral ng Pilipinas (BSP) increased benchmark borrowing costs last week and signaled further tightening.

The Bureau of the Treasury (BTr) will offer up to P36 billion in T-bills on Monday or P9 billion to P12 billion each in 91-, 182-, and 364-day papers.

On Tuesday, the government is targeting to raise up to P60 billion from a dual-tenor T-bond offering. It wants to borrow P20 billion to P30 billion each via reissued seven-year bonds with a remaining life of four years and two months and 10-year notes with a remaining life of nine years and 10 months.

T-bill and T-bond rates could follow the mixed week-on-week yield movements at the secondary market following the BSP’s first hike in over two years and hawkish signals, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The GS (government securities) market rose by as much as 25 bps (basis points) as players were quick to price the possibility of another rate hike in June,” a trader said in an e-mail.

The trader sees the seven- and 10-year bonds fetching rates of 6.55%-6.6% and 6.85%-6.9%, respectively, adding that demand could be “lukewarm as players are still shedding positions at this point.”

At the secondary market on Friday, yields on shorter tenors dropped while longer tenors rose following the BSP’s forward guidance.

The rates of the 91-, 182-, and 364-day T-bills went down by 7.14 bps, 4.48 bps, and 3.86 bps week on week to end at 4.5469%, 4.6632%, and 5.0583%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of April 24 published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bond rose by 15.31 bps to yield 6.7099%, while the rate of the four-year paper, the tenor closest to the remaining life of the issue on offer on Tuesday, went up by 15.24 bps to end at 6.3603%.

For its part, the 10-year bond’s rate went up by 13.52 bps week on week to 6.7956%.

On Thursday, the Monetary Board raised the target reverse repurchase rate by 25 bps to 4.5%, marking its first hike since October 2023. This effectively ended an easing cycle that cut the benchmark rate by 225 bps starting in August 2024.

BSP Governor Eli M. Remolona, Jr. signaled more further tightening ahead via “a succession of modest rate hikes” as they try to temper spiraling prices due to the Iran war as the global oil shock pushes up inflation expectations.

The BSP now sees inflation breaching their 2%-4% tolerance band in 2026 and 2027. For this year, it expects the consumer price index (CPI) to average 6.3%, significantly higher than the earlier 5.1% forecast.

This comes as elevated oil prices amid conflict drove headline inflation to a near two-year high of 4.1% in March, bringing the three-month average to 2.8%. Mr. Remolona said the CPI could breach 5% for the rest of the year.

For 2027, the BSP also raised its projection to 4.3% from 3.8% previously.

Last week, the Treasury raised P40.65 billion via the T-bills it auctioned off, above the P33-billion program as total tenders reached P127.256 billion or more than thrice the amount on offer.

The Treasury raised P16.8 billion via the 91-day T-bills, above the P12 billion it placed on the auction block as demand for the tenor reached P60.371 billion. The three-month paper fetched an average rate of 4.542%, falling by 20.8 bps from the rate seen in the previous week. Bids accepted had yields ranging from 4.5% to 4.596%.

The government likewise borrowed P16.8 billion via the 182-day debt, higher than the P12-billion offering as tenders reached P44.21 billion. The average rate of the six-month T-bill was at 4.649%, dropping by 41.3 bps from the previous auction. Tenders awarded carried rates from 4.598% to 4.7%.

Meanwhile, the BTr sold only P7.05 billion in 364-day securities, below the P9 billion on offer even as bids totaled P22.675 billion. The one-year paper fetched an average yield of 5.052%, easing by 11.6 bps. Accepted bids had rates from 4.95% to 5.097%.

For its part, the reissued seven-year papers on offer on Tuesday were last sold on Nov. 4, 2025, where the government raised P20 billion as planned at an average rate of 5.649%, below the 6.375% coupon rate.

Meanwhile, the 10-year notes were last offered on March 17, where the BTr awarded just P10.207 billion out of the P20 billion placed on the auction block at an average rate of 6.786%, above the 5.925% coupon.

The Treasury wants to borrow up to P248 billion from the domestic market this month 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 P1.61 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy