RATES of the Treasury bills (T-bills) and bonds (T-bonds) to be auctioned off this week may end mixed to track secondary market movements as the market continues to price in their inflation and monetary policy expectations.
The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday, or P7 billion each in 91- and 182-day papers and P8 billion in 364-day papers.
On Tuesday, the government will offer P30 billion in reissued seven-year T-bonds with a remaining life of five years and six months.
T-bill rates could mirror the week-on-week declines seen at the secondary market as players continued to price in their inflation and rate-cut expectations for this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Bangko Sentral ng Pilipinas (BSP) has cut benchmark borrowing costs by a total of 75 basis points (bps) since it began its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. last month said that while they remain in an easing cycle, 100 bps worth of cuts this year may be “too much” amid inflation concerns. He said the BSP is “neither more dovish nor less dovish” and is open to delivering another cut in their first policy meeting for 2025.
Meanwhile, the Fed began its own easing cycle in September 2024 with a 50-bp cut and followed it up with 25-bp reductions at each of its November and December meetings, bringing the fed funds rate to 4.25%-4.5%.
Fed Chair Jerome H. Powell has signaled cautiousness about future cuts due to stubbornly elevated inflation, with US central bank officials seeing just two 25-bp reductions this year, down from previous expectations of about four cuts.
Meanwhile, Mr. Ricafort said the reissued seven-year bonds to be auctioned off on Tuesday could fetch higher yields as December Philippine inflation may have picked up from the month prior.
The bonds could be “fairly received” and fetch rates ranging from 6.075%-6.125% as this week’s offer volume is higher compared to previous T-bond auctions, a trader added in an e-mail.
A BusinessWorld poll of 13 analysts yielded a median estimate of 2.7% for the December consumer price index, within the BSP’s 2.3%-3.1% forecast for the month.
This would be faster than the 2.5% in November and mark a third straight month of acceleration. However, this would be slower than 3.9% in December 2023.
The Philippine Statistics Authority will release December and full-year 2024 inflation data on Jan. 7 (Tuesday).
At the secondary market, yields on the 91-, 182-, and 364-day T-bills went down by 6.54 bps, 7.8 bps, and 12.85 bps week on week to end at 5.8286%, 5.9730%, and 6.0491%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Jan. 3 published on the Philippine Dealing System’s website.
Meanwhile, the seven-year bond’s yield inched up by 0.21 bp week on week to 6.1418%, while the five-year paper, the tenor closest to the remaining life of the T-bonds to be offered this week, saw its rate rise by 1.32 bps to 6.1116%.
On Dec. 16, the BTr raised P15 billion as planned from its last T-bill offering for 2024 as total bids reached P46.74 billion, more than three times as much as the amount on offer.
Meanwhile, the reissued seven-year bonds to be auctioned off on Tuesday were last offered on March 26, 2024, where the government P30 billion as planned at an average rate of 6.237%, lower than the 6.375% coupon.
The BTr plans to raise P213 billion from the domestic market this month, or P88 billion via T-bills and P125 billion through T-bonds.
The government borrows to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy
