RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may continue to decline with the Bangko Sentral ng Pilipinas (BSP) expected to deliver its fourth straight rate cut this week.
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 debt.
On Tuesday, the government will offer P30 billion in reissued 10-year T-bonds with a remaining life of seven years and seven months.
T-bill and T-bond rates may track the broad decline in secondary market yields amid expectations of another cut by the Monetary Board at their policy meeting on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The bonds to be auctioned off on Tuesday could attract strong demand and fetch rates ranging from 5.925% to 5.975%, a trader said in an e-mail.
“The local bond market’s posture leans toward a rate cut [this] week. If US labor data come within expectations, expect more buying action leading up to the Feb. 13 Monetary Board meeting,” the trader said.
At the secondary market on Friday, yields on the 91- and 182-day T-bills went down by 10.89 basis points (bps) and 2.6 bps week on week to 5.1697% and 5.4959%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Feb. 07 published on the Philippine Dealing System’s website. On the other hand, the 364-day T-bill inched up by 0.83 bp week on week to yield 5.7201%.
Meanwhile, the 10-year bond saw its yield go down by 11.1 bps week on week to end at 6.1178% on Friday, while the rate of the seven-year debt, the tenor closest to the remaining life of the T-bonds to be auctioned off on Tuesday, dropped by 8.63 bps to 5.9968%.
A BusinessWorld poll conducted last week showed that 19 out of 20 analysts expect the Monetary Board to reduce the target reverse repurchase rate by 25 bps at its meeting on Thursday.
If realized, this would mark the BSP’s fourth straight 25-bp cut since August and would bring the policy rate to 5.5% from 5.75% currently.
BSP Governor Eli M. Remolona, Jr. has said that a rate cut is “on the table” at this week’s policy meeting.
Mr. Remolona said they may slash benchmark interest rates by 50 bps this year as “policy insurance” against risks, with the cuts likely to be done in 25-bp increments each in the first and second half.
Last week, the BTr raised P27.6 billion at its T-bill auction, higher than the P22-billion plan, as total bids reached P70.649 billion, more than thrice as much as the amount on offer.
Broken down, the Treasury borrowed P9.8 billion via the 91-day T-bills, higher than the programmed P7 billion, as tenders for the tenor reached P27.95 billion. The three-month paper was quoted at an average rate of 5.101%, down by 1.2 bps from the previous auction, with accepted rates ranging from 5.05% to 5.123%.
The government also made a P9.8-billion award of the 182-day securities, above the P7-billion plan, as bids stood at P22.35 billion. The average rate of the six-month T-bill stood at 5.477%, 1.1 bps lower than the previous auction. The tenders accepted by the BTr carried rates of 5.418% to 5.518.
Lastly, the Treasury raised P8 billion as planned via the 364-day debt papers as demand for the tenor totaled P20.349 billion. The average rate of the one-year debt decreased by 5.3 bps to 5.671%, with bids accepted having rates of 5.6% to 5.72%.
Meanwhile, the reissued bonds to be offered on Monday were last offered on Jan. 14, where the Treasury raised P30 billion as planned at an average rate of 6.249%, lower than the 6.75% coupon rate.
The BTr is looking to raise P203 billion from the domestic market this month, or P88 billion from T-bills and P115 billion from T-bonds.
The government borrows from local and foreign sources 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
