T-bill, bond rates may be mixed on easing hopes

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could end mixed as the market prices in expectations of further monetary easing from both the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve this month.

The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday or P7 billion in 91-day papers and P7.5 billion each in 182-day and 364-day debt.

On Tuesday, the government will offer P35 billion in dual-tenor T-bonds, or P20 billion in reissued seven-year papers with a remaining life of two years and four months, and P15 billion in reissued 10-year debt with a remaining life of nine years and four months.

T-bill yields could be mixed to track secondary market movements as both the BSP and the Fed are expected to deliver rate cuts at their meetings this month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The bonds on offer on Tuesday could also fetch average yields close to those at the secondary market, he said.

A trader said the reissued seven-year debt could be quoted at 5.2-5.25% and the reissued 10-year bond could fetch rates of 5.825-5.85%, with both expected to see “good reception” from the market.

“[The bond] auctions should still be well bid as these will be the last for the year,” the trader said.

At the secondary market on Friday, the 91-day T-bill inched up by 1.44 basis points (bps) week on week to yield 4.8820%, based on the PHP Bloomberg Valuation Service Rates data as of Nov. 28 published on the Philippine Dealing System’s website. Meanwhile, the 182-day and 364-day debt slipped by 0.33 bp and 1.41 bps to end at 4.9999% and 5.0711%, respectively.

For the bonds, the seven-year paper climbed by 1.12 bps week on week to fetch 5.7291%, while the three-year debt — the benchmark tenor closest to the remaining life of the issue to be auctioned off on Tuesday — also rose by 3.63 bps to end at 5.3310%. For its part, the 10-year bond went up by 4.08 bps week on week to yield 5.9364%.

BSP Governor Eli M. Remolona, Jr. earlier said they could deliver a fifth straight 25-bp cut at the Monetary Board’s Dec. 11 meeting to help provide economic stimulus following the slower growth seen last quarter as a corruption scandal involving government infrastructure projects has weakened consumer and investor confidence.

The central bank has lowered borrowing costs by a total of 175 bps since it began its easing cycle in August 2024, with the policy rate now at an over three-year low of 4.75%.

Meanwhile, traders conclude that weakening labor data will lead to more rate cuts, even as many Fed policymakers express concern about still-elevated inflation, Reuters reported.

The US federal government is releasing a backlog of economic data after reopening from a record 43-day shutdown.

Fed funds futures traders are pricing in 87% odds of a cut at the conclusion of the Fed’s Dec. 9-10 meeting, up from 71% a week prior, according to the CME Group’s FedWatch Tool.

Signals from some US central bank officials, led by New York Fed President John Williams and Governor Christopher Waller, that a December rate cut may be warranted due to labor market weakness have added downward pressure on Treasury yields and reinforced dovish bets in futures markets.

Their stance, however, contrasted with several regional Fed presidents advocating a pause in easing until inflation shows a more convincing move toward the 2% target.

Both the trader and Mr. Ricafort said S&P Global Ratings’ move to affirm the Philippines’ investment-grade “BBB+” rating and its positive outlook on Thursday also helped improve sentiment in the bond market.

Last week, the BTr raised P25 billion from the T-bills it auctioned off, higher than the P22-billion plan, as total bids reached P84.87 billion or almost four times the amount on offer.

Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as total tenders for the tenor reached P28.31 billion. The three-month paper was quoted at an average rate of 4.849%, inching up by 0.7 bp from the previous week. Yields accepted were from 4.828% to 4.873%.

The government also sold the programmed P7.5 billion in 182-day securities as tenders for the tenor totaled P29.55 billion. The average rate of the one-year T-bill was flat at 4.97%. Bids awarded carried yields from 4.95% to 4.973%.

Lastly, the government increased its award of 364-day securities to P10.5 billion from the P7.5-billion plan as tenders hit P27.01 billion. The average rate of the one-year T-bill was at 5.003%, decreasing by 1.4 bps week on week. Accepted rates were from 4.998% to 5.013%.

Meanwhile, the reissued seven-year bonds on offer on Tuesday were last auctioned off on Oct. 7, where the BTr borrowed P15 billion as planned at an average rate of 5.698%. Accepted yields ranged from 5.6% to 5.71%.

The reissued 10-year bonds up for sale this week were last offered on Nov. 4, with the government raising P15 billion as programmed at an average yield of 5.894%, with accepted tenders carrying rates of 5.889% to 5.898%.

The BTr wants to raise P101 billion from the domestic market this month, or P66 billion via T-bills and P35 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — ARAI with Reuters