RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may decline to track the broad rally seen at the secondary market in the past few days amid US President Donald J. Trump’s soft tariff stance on China and remarks urging the US Federal Reserve to continue cutting rates.
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 is looking to raise P35 billion via two T-bond tenors. Broken down, it will offer P15 billion in reissued seven-year bonds with a remaining life of three years and two months, and P20 billion in new 25-year papers.
Auction yields could mirror the week-on-week declines seen for their corresponding secondary market benchmarks following Mr. Trump’s comments on further Fed interest rate cuts, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The market reacted positively to the latest news of Trump’s tariff plans on China and his support for lowering the policy rate,” a trader likewise said in an e-mail.
The reissued seven-year bonds could see “healthy” demand and fetch rates ranging from 5.85% to 5.95%, the trader added.
At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills went down by 18.51 basis points (bps), 5.44 bps, and 4.87 bps to end at 5.3122%, 5.5721% and 5.8467%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Jan. 24 published on the Philippine Dealing System’s website.
The rate of the seven-year bond went down by 2.64 bps week on week to 6.2452%, while the three-year paper, or the tenor closest to the remaining life of the reissued bonds to be offered on Tuesday, decreased by 8.06 bps to yield 5.985%.
Meanwhile, the 25-year bond rose by 4.23 bps week on week to fetch 6.4342%.
In a Fox News interview, Mr. Trump said he would rather not use tariffs against China and that a phone call with Chinese President Xi Jinping the prior week was friendly, Reuters reported.
Meanwhile, Mr. Trump on Thursday said he wants the Federal Reserve to cut interest rates at a time the central bank has hit pause for an uncertain duration, arguing he understands monetary policy better than those charged with setting it.
“With oil prices going down, I’ll demand that interest rates drop immediately, and likewise they should be dropping all over the world,” Mr. Trump told the World Economic Forum on Thursday in Davos, Switzerland.
At a White House event following those comments, Mr. Trump said, “I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision,” in an apparent reference to Federal Reserve Chairman Jerome H. Powell, who Mr. Trump appointed as Fed leader in his first stint as president.
The Fed last cut its overnight interest rate target by a quarter percentage point at its December policy meeting to between 4.25% and 4.5%.
For all of 2024, the Fed lowered rates by a full percentage point amid easing inflation pressures and a sense among Fed officials that they wanted monetary policy to exert less restraint on the economy’s momentum. The December meeting also saw officials trim estimates of cuts in 2025 amid expectations of higher levels of inflation and slightly better growth.
Mr. Ricafort added that the T-bills and T-bonds to be offered this week could fetch lower rates after the Philippine government last week raised $3.3 billion from its offerings of US dollar and euro bonds.
Broken down, the government borrowed a total of $2.25 billion from its offer of dual-tenor US dollar-denominated bonds, which consisted of 10-year papers and 25-year sustainability debt.
Meanwhile, it raised €1 billion via seven-year euro-denominated sustainability bonds.
Last week, the government borrowed P27.6 billion from the T-bills it auctioned off, higher than the initial P22-billion plan, as total bids reached P93.89 billion, more than four times the amount on offer.
Meanwhile, the reissued seven-year bonds to be auctioned off on Tuesday were last offered on July 27, 2021, where the government raised P35 billion as planned at an average rate of 3.651%, lower than the 3.625% 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 from local and offshore sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — AMCSwith Reuters
