RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may continue to move lower on expectations of further monetary easing by the Bangko Sentral ng Pilipinas (BSP) after Philippine economic growth fell below the government’s target in 2024.
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 five months.
T-bill and T-bond auction yields could mirror the week-on-week decline in secondary market rates as softer-than-expected Philippine gross domestic product (GDP) growth last year could support further policy easing by the BSP, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went down by 3.36 basis points (bps), 5.02 bps, and 13.49 bps week on week to end at 5.2786%, 5.5219% and 5.7118%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Jan. 31 published on the Philippine Dealing System’s website.
Meanwhile, the seven-year bond went down by 7.37 bps week on week to yield 6.0831%, while the rate of the five-year debt, the tenor closest to the remaining life of the T-bonds to be offered on Tuesday, dropped by 9.59 bps to end at 5.9872%.
Philippine GDP expanded by 5.6% in 2024, missing the government’s 6%-6.5% full-year growth target but slightly faster than 5.5% in 2023.
BSP Governor Eli M. Remolona, Jr. on Friday said that a rate cut is “on the table” at the Monetary’s Board’s Feb. 13 policy meeting, with economic growth “a little bit below capacity.”
“If the [output] gap is widening, if it becomes more negative, then it would call for more easing,” Mr. Remolona said.
On Saturday, the BSP chief said the Philippine central bank may cut benchmark rates by 50 bps this year in a gradual manner as “policy insurance” against risks.
Mr. Remolona said the reductions could be implemented in increments of 25 bps each in the first and second half of the year.
The Monetary Board has slashed benchmark borrowing costs by 75 bps since kicking off its easing cycle in August last year, bringing the policy rate to 5.75%.
Meanwhile, a trader said in an e-mail that the reissued bonds on offer on Tuesday could fetch rates ranging from 5.90% to 5.975% before the release of January Philippine inflation data on Wednesday (Feb. 5).
“Higher fuel and some major food items due to weather disturbances are expected to pressure the print,” the trader said.
A BusinessWorld poll of 16 analysts yielded a median estimate of 2.8% for the January consumer price index.
If realized, this would be a tad slower than 2.9% in December and match the 2.8% print in the same month a year ago. This would also be within the BSP’s 2.5%-3.3% forecast for the month.
Alessandra P. Araullo, chief investment officer at ATRAM Trust Corp., said in a Viber message that the T-bonds could be quoted at 5.95% to 6.05%, depending on the market’s appetite for longer tenors.
Last week, the BTr raised P27.6 billion from its auction of T-bills, higher than the initial P22-billion plan, as total bids reached P91.06 billion, more than four times as much as the amount on offer.
The oversubscription led the Treasury to double the accepted non-competitive bids for the three- and six-month debt to P5.6 billion each for the third straight T-bill auction.
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 P32.25 billion. The three-month paper was quoted at an average rate of 5.113%, falling by 42.3 bps from the previous auction, with accepted rates ranging from 5.098% to 5.128%.
The government also made a P9.8-billion award of the 182-day securities, above the P7-billion program, as bids stood at P26.65 billion. The average rate of the six-month T-bill stood at 5.488%, dropping by 13.5 bps, with the BTr only accepting bids with this yield.
Lastly, the Treasury raised P8 billion as planned via the 364-day debt papers as demand for the tenor totaled P32.16 billion. The average rate of the one-year debt decreased by 5.1 bps to 5.724%, with bids accepted having rates of 5.69% to 5.728%.
Meanwhile, the reissued bonds to be offered on Tuesday were last auctioned off on Jan. 7, where the government raised P30 billion as planned for an average rate of 6.06%, below the 6.375% coupon rate.
The Treasury 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