T-bill, bond rates may drop on BSP cut hopes

RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could go down to track secondary market movements amid hopes for further monetary easing, even with players expected to take positions before an upcoming offering of new 10-year benchmark notes.

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 will offer P30 billion in reissued 10-year T-bonds with a remaining life of seven years and six months.

T-bill and T-bond yields could mirror the week-on-week decline seen at the secondary market as the market still expects a sixth straight cut from the Bangko Sentral ng Pilipinas (BSP) next week despite faster January inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A trader said the reissued T-bonds to be auctioned off on Tuesday could fetch rates from 5.875% to 5.925% as players may be on the defensive before the jumbo 10-year bond issuance next week.

The government is looking to raise at least P30 billion through fresh 10-year benchmark bonds. The rate-setting auction will be on Feb. 18, with the public offer period set to run until Feb. 20.

At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills fell by 11.21 basis points (bps), 8.98 bps, and 10.38 bps week on week to end at 4.5705%, 4.6827%, and 4.7374%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Feb. 6 published on the Philippine Dealing System’s website.

For its part, the yield on the 10-year bond dropped by 2.7 bps week on week to close at 5.9598%, while the seven-year paper, the tenor closest to the remaining life of the papers on offer this week, saw its rate go down by 5.17 bps to 5.8032%.

Headline inflation rose to 2% in January from 1.8% in December, but slowed from the 2.9% in the same month last year. This was the fastest print in 11 months or since 2.1% in February 2025.

This was within the BSP’s 1.4% to 2.2% estimate for the month, but was faster than the 1.8% median forecast in a BusinessWorld survey of 18 economists.

BSP Governor Eli M. Remolona, Jr. earlier said that a rate cut is possible at the Monetary Board’s Feb. 19 meeting if they see the need to support domestic demand, especially after economic growth hit a five-year low last year due to the ongoing fallout from a corruption scandal that stalled both public and private spending.

However, the central bank last week again signaled an imminent end to its current easing cycle. The Monetary Board has slashed benchmark borrowing costs by 200 bps since August 2024, bringing the policy rate to 4.5%.

Last week, the Treasury raised P37.8 billion via the T-bills it auctioned off, higher than the P27-billion plan as the offer was oversubscribed, with total tenders reaching P176.819 billion. This prompted the Auction Committee to double its acceptance of noncompetitive bids for all tenors to P7.2 billion each.

The government awarded P12.6 billion in 91-day T-bills, above the P9-billion plan, as demand for the tenor reached P62.111 billion. The three-month paper fetched an average rate of 4.579%, down by 8.7 bps from the previous week. Yields accepted ranged from 4.548% to 4.593%.

The Treasury also borrowed P12.6 billion via the 182-day debt versus the P9-billion program as tenders hit P59.818 billion. The average rate of the six-month T-bill was at 4.672%, easing by 7.9 bps week on week. Tenders awarded carried yields from 4.63% to 4.7%.

Lastly, the BTr raised P12.6 billion from the 364-day securities, more than the P9-billion plan, as bids totaled P54.89 billion. The one-year paper’s average yield was at 4.689%, falling by 13.8 bps. Accepted rates were from 4.67% to 4.735%.

Meanwhile, the reissued 10-year T-bonds to be offered on Tuesday were last auctioned off on Dec. 5, 2023, where the government raised P20 billion as planned at an average rate of 6.224%, below the 6.625% coupon rate.

The BTr wants to raise P308 billion from the domestic market this month, or P108 billion via T-bills and up to P200 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. — A.M.C. Sy