RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could end mixed as market volatility and recession fears due to US trade policy uncertainties continue to affect global yields.
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion each in 91- and 182-day papers and P9 billion in 364-day papers.
On Tuesday, the government will offer P30 billion in reissued 10-year T-bonds with a remaining life of seven years and four months.
T-bill and T-bond rates could mirror the mixed movements seen in secondary market yields as markets recalibrate their expectations amid ongoing uncertainties, analysts said.
The T-bills on offer on Monday may fetch mostly higher yields following the increase in comparable secondary market benchmark rates, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Ricafort added that yields on the reissued 10-year bonds to be auctioned off on Tuesday may inch down to track secondary market rate movements amid growing expectations of a Federal Reserve rate cut following weak US economic data recently.
The bonds may fetch rates ranging from 6.04% to 6.075% and see decent demand, a trader said in an e-mail.
The trader added that the local bond market mostly consolidated last week amid the release of several key US economic reports.
At the secondary market on Friday, the 91- and 182-day T-bills rose by 5.88 basis points (bps) and 6.24 bps week on week to end at 5.5146% and 5.6713%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of April 25 published on the Philippine Dealing System’s website. Meanwhile, the 364-day T-bill’s yield went down by 1.79 bps to 5.7183%.
On the other hand, the 10-year bond decreased by 8.01 bps week on week to yield 6.2603%, while the seven-year debt, the tenor closest to the remaining life of the T-bonds to be offered on Tuesday, went down by 4 bps to 6.0528%.
Federal Reserve policymakers on the alert for possible cracks in the labor market as businesses adjust to President Donald J. Trump’s erratic trade policy got some reassurance on Friday that so far there’s little weakness, and no reason to rush on rate cuts, Reuters reported.
US employers added a more-than-expected 177,000 jobs in April, the Labor department reported, and the unemployment rate was unchanged at 4.2%. Both are signs the labor market remains in balance during a month when Mr. Trump announced the steepest tariffs in a century, sending stocks downward and convulsing the bond market before the administration paused many of those levies until July.
With the job market holding up and inflation still running above their 2% target, Fed policymakers are expected to stick to their plan to leave short-term borrowing costs where they are while they wait to see how the tariffs affect prices and economic growth.
Traders are now betting the Fed will wait until July to start cutting interest rates; earlier they had thought a June move was more likely. And they now see the Fed delivering a total of three quarter-point interest rate cuts by yearend, one fewer than previously.
Shortly after the report, Mr. Trump reiterated his own call for the Fed to lower rates.
Fed policymakers, who say it will be the economy’s needs, not the president’s desires, that will dictate their moves, want to be sure that inflation won’t resurge. They have signaled that to do so they’ll keep the policy rate in the current 4.25%-4.5% range, as long as the job market doesn’t crumble.
Last week, the BTr raised P25 billion as planned from the T-bills it auctioned off as total bids reached P80.265 billion or more than thrice the amount on offer.
Broken down, the Treasury borrowed the programmed P8 billion via the 91-day T-bills as tenders for the tenor reached P22.025 billion. The three-month paper was quoted at an average rate of 5.546%, steady from the previous auction. Tenders accepted by the BTr carried yields of 5.494% to 5.608%.
The government likewise made a full P8-billion award of the 182-day securities as bids for the paper amounted to P29.21 billion. The average rate of the six-month T-bill went up by 2 bps week on week to 5.655%, with accepted rates ranging from 5.6% to 5.684%.
Lastly, the Treasury raised P9 billion as planned via the 364-day debt papers as demand for the tenor totaled P29.03 billion. The average rate of the one-year T-bill inched down by 0.3 bp to 5.688%, with bids accepted having yields of 5.684% to 5.7%.
Meanwhile, the T-bonds to be offered on Tuesday were last auctioned off on March 11, where the government raised P30 billion as planned at an average rate of 6.143%, lower than the 6.75% coupon.
The Treasury plans to raise P260 billion from the domestic market this month, or P100 billion via T-bills and P160 billion through 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. Sywith Reuters
