T-bill, T-bond yields may rise on rate hike outlook

By Aaron Michael C. Sy, Reporter

RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) to be offered this week could rise further as investors continue to demand higher returns amid market uncertainty, persistent inflation concerns and expectations of additional interest rate increases.

Yields might continue to climb following the rise in the secondary market amid concerns over the peso’s weakness and political tensions, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

T-bill and T-bond rates could follow the week-on-week increase in the secondary market on weakening sentiment after the peso broke a record low against the dollar and amid political unrest, he said in a Viber message.

The Bureau of the Treasury (BTr) will auction off as much as P39 billion in T-bills on Monday — P13 billion each in 91-, 182- and 364-day securities.

On Tuesday, the government plans to raise P30 billion through reissued 10-year Treasury bonds with a remaining life of seven years and three months.

Yields on short-term government debt rose sharply in the secondary market on Friday. The 91-day, 182-day and 364-day T-bills climbed to 4.91%, 5.29% and 5.91%, respectively, based on PHP Bloomberg Valuation reference rates published on the BTr website.

Meanwhile, the 10-year bond yield rose to 7.62%, while the seven-year rate climbed to 7.57%.

The peso closed at a fresh record low of P61.721 a dollar on Friday, weakening further from the previous day’s close.

The local currency has depreciated by nearly 5% against the dollar this year.

Analysts said the peso’s weakness, driven partly by elevated oil prices linked to the Middle East war, has added to inflation concerns and expectations of tighter monetary policy.

Political turmoil also continued to weigh on market sentiment after the Senate convened as an impeachment court for the trial of Vice-President Sara Duterte-Carpio.

Concerns over the International Criminal Court investigation linked to former President Rodrigo R. Duterte’s anti-drug campaign have also added to political uncertainty.

A trader said investors remained cautious in the secondary market last week amid growing expectations of further rate hikes by the Bangko Sentral ng Pilipinas (BSP).

The Monetary Board last month raised benchmark interest rates by 25 basis points to 4.5%, the central bank’s first rate hike since 2023.

BSP Governor Eli M. Remolona, Jr. has since signaled the possibility of further tightening through “a succession of modest rate hikes” as inflation risks persist following the oil price shock linked to the Iran war.

Last week, the Treasury raised P27.51 billion from its T-bill auction, below the P32-billion target, despite healthy investor demand.

The average rates for all three tenors rose sharply from the previous auction, reflecting investors’ demand for higher yields.

The Treasury bond to be auctioned on Tuesday was last offered in April, when the government raised P20 billion at an average rate of 6.643%.

The government plans to borrow P268 billion from the domestic market this month through T-bills and T-bonds as it seeks to help finance this year’s budget deficit.