T-bill, bond rates likely mixed as inflation eases

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be offered this week may end mixed as slower-than-expected May inflation data tempered earlier bets of aggressive tightening by the central bank.

The Bureau of the Treasury (BTr) will auction off up to P60 billion in T-bills on Monday, or P20-30 billion in 91-day papers, P15-20 billion in 182-day securities, and P7-10 billion in 364-day debt.

On Tuesday, the government is targeting to raise up to P65 billion from a dual-tenor T-bond offering. Broken down, it will offer P30-40 billion in reissued seven-year T-bonds with a remaining life of three years and four months, and P20-25 billion in 25-year notes with a remaining life of eight years and four months.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill yields could correct lower after mostly rising for the past six weeks, save for the 182-day bill that already eased, as comparable secondary market rates went down “after slower-than-expected latest local inflation data that could somewhat reduce urgency for immediate BSP (Bangko Sentral ng Pilipinas) rate hike…”

Still, aggressive monetary action “cannot be completely ruled out as the latest inflation rate at 6.8% remains way above the BSP’s inflation target of 2%-4%,” he said in a Viber message.

“GS market was generally quiet despite the lower-than-expected CPI (consumer price index) print… Yields in the four-year to five-year space declined by around 2-3 bps (basis points) but generally, offers were heavy,” a trader said in an e-mail.

Following this, the reissued seven-year bonds could fetch yields of 7.2%-7.25%, while the reissued 25-year notes could be quoted at 7.6%-7.7%, the trader said.

“In the T-bills space, the BTr increased borrowing size for the 91-day bill to P20-30 billion from P15-20 billion to keep up with the demand.”

At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills went down by 3.31 bps, 3.96 bps, and 4.23 bps week on week to close at 4.9562%, 5.3645%, and 6.0644%, respectively, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bond inched up by 1.45 bps week on week to end at 7.4853%, while the three-year paper, the tenor closest to the remaining life of the issue on offer this week, edged up by 0.27 bp to 7.0692%.

The 25-year bond’s rate rose by 4.09 bps week on week to 7.5957%, and the 10-year tenor, the benchmark nearest to the remaining life of the papers to be offered on Tuesday, went up by 0.85 bp to yield 7.5293%.

Inflation settled at 6.8% in May, slowing from 7.2% in April but still faster than the 1.3% in the same month last year, the government reported on Friday.

This was the first time since November 2025 that the headline print eased month on month, and was the slowest pace since the 4.1% in March.

The May reading was also below the 7.9% median estimate of 16 economists for the month in a BusinessWorld poll and the central bank’s 7.1-7.9% forecast.

Still, this was the third month in a row that the consumer price index (CPI) breached the central bank’s 2%-4% tolerance range.

It also brought the five-month average past the goal at 4.5%.

BSP Governor Eli M. Remolona, Jr. earler said the Monetary Board is considering more aggressive policy action to help curb spiraling prices as the Middle East conflict continues to stoke inflation.

The Monetary Board on April 23 delivered its first rate increase in over two years, raising benchmark borrowing costs by 25 bps to bring the policy rate to 4.5%. Its next meeting is on June 18.

The BSP said in a statement on Friday that it will continue to monitor developments in the Middle East, with inflation expected to remain above its comfort band this year and next.

“Inflation expectations have also risen further, heightening the risk of de-anchoring from the 3% target due to more persistent inflation pressures and broadening price pressures,” it said.

“Looking ahead, the Monetary Board will continue to be guided by incoming data during its June 2026 monetary policy meeting. The BSP will reassess the macroeconomic outlook to incorporate the May 2026 CPI, Q1 2026 national accounts, and key domestic and international developments that have impact on the country’s inflation outlook and growth prospects.”

Last week, the BTr raised P40 billion as planned via the T-bills it auctioned off as total tenders reached P70.505 billion.

Broken down, the Treasury borrowed P20 billion as programmed via the 91-day T-bills as demand for the tenor reached P36.105 billion. The three-month paper fetched an average rate of 5.143%, inching up by 0.1 bp from the last auction. Bids accepted had yields ranging from 5% to 5.2%.

The government also raised the planned P13 billion via the 182-day debt as tenders reached P22.83 billion. The average rate of the six-month T-bill was at 5.624%, declining by 7.6 bps from the previous week. Tenders awarded carried rates from 5.49% to 5.749%.

Lastly, the BTr sold its targeted P7 billion in 364-day securities as demand for the tenor totaled P11.57 billion. The one-year paper fetched an average yield of 6.269%, rising by 10.6 bps week on week. Accepted bids had rates from 6.05% to 6.325%.

For its part, the reissued seven-year bonds up for auction on Tuesday were last sold on May 5, where the government raised P20 billion as planned at an average rate of 6.933%, below the 7% coupon rate.

The reissued 25-year papers were last offered on April 7, where the BTr sold P18.623 billion, below the P20-billion plan. The papers fetched an average rate of 6.747%, below the 9.25% coupon.

The Treasury is looking to raise P268 billion from the domestic market this month, or P128 billion via T-bills and P140 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