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Rates of Treasury bills, bonds to go up


RATES of government securities on offer this week may rise on expectations of further tightening by the central bank to support the weakening currency.

The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Monday, made up of P5 billion each in 91-, 182-, and 364-day debt papers.

On Tuesday, the BTr will offer P35 billion in reissued 25-year Treasury bonds (T-bonds) with a remaining life of 12 years and 11 months.

A trader expects rates of T-bills and T-bonds on offer this week to continue rising after the Finance chief said the central bank may consider big hikes in their last two meetings for the year to help support the peso.

Finance Secretary Benjamin E. Diokno is a member of the Monetary Board, the Bangko Sentral ng Pilipinas’ (BSP) policy-setting body.

The trader said T-bill rates may climb by 25 basis points (bps) if awarded, while the average rate of the reissued 25-year bond could range between 7.75% and 8.125%.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a text message that Mr. Diokno’s signals could cause T-bill and T-bond yields to go up at this week’s auctions, tracking secondary market rates.

“With inflation and interest rates yet to peak, interest rates are still seen to rise, especially after the BSP hinted that more hikes are likely,” eManagement for Business and Marketing Services Managing Director Jonathan L. Ravelas added in a text message.

For his part, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the reissued 25-year bonds to be auctioned off this week may fetch yields from 7.625% to 7.875% as investors anticipate further rate hikes here and abroad, which could cause the global economy to slow.

Mr. Diokno told Bloomberg last week that the government will act “aggressively” to prevent the peso from further weakening, which could include looking at a total of 100 bps worth of hikes at the BSP’s Nov. 17 and Dec. 15 meetings following 225 bps in cumulative increases since May.

If realized, this would bring the BSP’s policy rate to 5.25% — the highest since the central bank adopted the interest rate corridor framework in 2016.

Mr. Diokno also said the government plans to use its foreign exchange reserves to prevent the peso-dollar exchange rate from breaching P60 and bring it back to P55 by yearend, which is “where [they] want it to be.”

The country’s gross international reserves as of end-September stood at $93 billion, 4.5% lower than the $97.4 billion as of end-August.

On Friday, the local currency ended at P58.75 against the dollar. For the year so far, the peso has weakened by 15.2% or P7.75 from its P51 close on Dec. 31, 2021.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 3.5554%, 4.3793%, and 3.9236%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the 10-year bond, the tenor closest to the remaining life of the bonds to be auctioned off this week, fetched a yield of 7.3823%. 

Last week, the BTr rejected all bids for its offer of T-bills, even as total tenders reached P16.303 billion, higher than the P15 billion on the auction block.

Broken down, the Treasury refused all offers for the 91-day T-bill even as total tenders reached P7.6 billion, above the P5-billion plan. Had the Treasury made a full award, the three-month debt papers would have fetched an average rate of 4.82%, 250.2 bps higher than the 2.318% seen on Sept. 5, the last successful award of the tenor.

The BTr also turned down all 182-day securities even as demand reached P5.503 billion, higher than the programmed P5 billion. If the offer was fully awarded, the average rate of the six-month T-bill would have gone up by 126.8 bps to 5.226% from the 3.958% quoted for the last successful award on Sept. 26.

Lastly, the government did not award any 364-day debt papers as total bids came in at only P3.2 billion, below the P5-billion offer. Had the Treasury accepted these bids, the average yield on the one-year instrument would have jumped by 208 bps to 5.862% from the 3.782% fetched for the tenor when it was last awarded on Aug. 22.

Meanwhile, the reissued 25-year bonds to be offered on Tuesday were first issued on Sept. 30, 2010 at a coupon rate of 8%.

The BTr plans to raise P200 billion from the domestic market this month, or P60 billion through T-bills and P140 billion from T-bonds.

The government borrows from local and external sources to help plug a budget deficit capped at 7.6% of gross domestic product this year. — L.M.J.C. Jocson

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