T-bill, bond rates may be mixed before BSP review

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be offered this week may end mixed as the market’s focus turns to the Bangko Sentral ng Pilipinas’ (BSP) policy meeting, where it could provide hints on its future policy direction.

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 Wednesday, the government will hold the rate-setting auction for its new 10-year fixed-rate benchmark Treasury notes through which it plans to raise at least P30 billion, with the public offer scheduled to end on Friday. The offering also includes an exchange program for holders of bonds maturing over the next year.

“The size/volume of the new money will depend on the market appetite or demand, but definitely lower than what we raised last year,” National Treasurer Sharon P. Almanza said in a Viber message.

In April last year, the government raised P300 billion via new 10-year benchmark notes, above the P30-billion program. The offering was done through a new issuance format targeting institutional investors like corporates, cooperatives, trust funds, retirement funds, and provident funds.

A trader said the bonds to be offered on Wednesday could attract at least P100 billion in tenders and fetch an average rate ranging from 6% to 6.75%.

T-bill and T-bond yields could track the mixed week-on-week movements seen at the secondary market ahead of the BSP’s policy meeting, where it is expected to cut benchmark rates by 25-basis-point (bp) cut to provide support to the economy as inflation remains manageable, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He added that the P232.8-billion seven-year bond maturity on Feb. 14 could boost demand for this week’s auctions as the liquidity freed up could be reinvested in the new issuances.

At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills went down by 2.07 bps, 4.73 bps, and 5.93 bps week on week to end at 4.5498%, 4.6354%, and 4.6781%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Feb. 13 published on the Philippine Dealing System’s website.

Meanwhile, the 10-year bond rose by 0.78 bp week on week to fetch 5.9676%.

All 16 analysts in a BusinessWorld poll expect the Monetary Board to deliver a sixth straight 25-bp cut at its first meeting for the year on Thursday (Feb. 19) to bring the policy rate to 4.25%.

The BSP has lowered benchmark borrowing costs by a cumulative 200 bps since its easing cycle began in August 2024.

BSP Governor Eli M. Remolona, Jr. last week said that a rate cut is possible at this week’s review amid weak economic growth, but reiterated that price stability remains their primary mandate and their easing cycle is nearing its end.

Last week, the BTr 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 P158.173 billion. The Auction Committee doubled its acceptance of noncompetitive bids for all tenors to P7.2 billion to take advantage of the strong demand and low yields.

Broken down, the government awarded P12.6 billion in 91-day T-bills, above the P9-billion plan, as demand for the tenor reached P55.681 billion. The three-month paper fetched an average rate of 4.492%, down by 8.7 bps from the previous week. Yields accepted ranged from 4.44% to 4.525%.

The Treasury also borrowed P12.6 billion via the 182-day debt as tenders hit P56.582 billion. The average rate of the six-month T-bill was at 4.578%, easing by 9.4 bps. Tenders awarded carried yields from 4.52% to 4.609%.

Lastly, the BTr raised P12.6 billion from the 364-day securities as bids totaled P45.91 billion. The one-year paper’s average yield was at 4.615%, falling by 7.4 bps. Accepted rates were from 4.599% to 4.64%.

The government aims 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. — Aaron Michael C. Sy