T-bill, bond rates may drop as markets monitor US-Iran talks

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be offered this week could end lower on renewed demand for risk assets following the temporary ceasefire between the United States and Iran.

The Bureau of the Treasury (BTr) will auction off up to P36 billion in T-bills on Monday, or P9 billion to P12 billion each in 91-, 182-, and 364-day papers.

On Tuesday, the government is targeting to raise P20 billion to P30 billion from 20-year T-bonds with a remaining life of five years and three months.

T-bill and T-bond rates could follow the week-on-week decline in secondary market yields as risk sentiment improved as a result of the temporary ceasefire between the US and Iran announced last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This caused global oil prices to go down and the peso to return to the P59 level, which could help ease domestic inflationary pressures, he said.

A trader said in an e-mail that the reissued 20-year bonds to be offered this week could  fetch rates ranging from 6.25% to 6.3% on “good demand.”

At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills fell by 22.98 basis points (bps), 21.12 bps, and 2.12 bps to end at 4.7599%, 4.9141%, and 5.1591%, respectively, based on PHP Bloomberg Valuation (BVAL) Service Reference Rates data as of April 10 published on the Philippine Dealing System’s website.

For its part, the 20-year bond’s rate went down by 16.05 bps week on week to end at 6.8632%, while the five-year debt, the closest tenor to the remaining life of the papers on offer this week, dropped by 23.81 bps to yield 6.3837%.

On Friday, the local unit closed at P59.97 against the dollar, weakening by 54 centavos from its P59.43 finish on Wednesday, Bankers Association of the Philippines data showed.

Week on week, the peso gained by 19 centavos from its P60.16 finish on April 1.

Last week, the government raised only P22.8 billion via the T-bills it auctioned off, below the P27-billion target, even as total tenders were at P50.203 billion or nearly twice the amount on offer.

Broken down, for the 91-day T-bills, the government raised P9 billion as planned as demand for the tenor reached P26.66 billion. The three-month paper fetched an average rate of 4.985%, easing by 1.9 bps from the previous week. Bids accepted had yields ranging from 4.898% to 5.025%.

The Treasury likewise borrowed the programmed P9 billion via the 182-day debt as tenders reached P16.552 billion. The average rate of the six-month T-bill was at 5.08%, rising by 4.8 bps from the last auction. Tenders awarded carried rates from 5.014% to 5.199%.

Meanwhile, the BTr sold just P4.8 billion in 364-day securities, below the P9-billion plan as the offer was undersubscribed, with bids reaching only P6.991 billion. The one-year paper fetched an average yield of 5.204%, up by 3.8 bps. Accepted bids had rates from 5.148% to 5.25%.

On the other hand, the reissued 20-year bonds to be auctioned off on Tuesday were last offered on Aug. 13, 2024, where the government raised P30 billion as planned at an average rate of 6.128%, below the 8% coupon rate.

The BTr wants to borrow up to P248 billion from the domestic market this month, or P140 billion via T-bills and P108 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.61 trillion or 5.3% of gross domestic product this year.

The US and Iran failed to reach an agreement to end their war despite marathon talks that concluded on Sunday in the Pakistani capital Islamabad, jeopardizing a fragile ceasefire, Reuters reported.

Each side blamed the other for the failure of the 21-hour negotiations to end fighting that has killed thousands and sent global oil prices soaring since it began over six weeks ago.

The US and Iranian delegations have left Islamabad to return home, Pakistani sources told Reuters.

The talks in Islamabad, after a ceasefire earlier in the week, were the first direct US-Iranian meeting in more than a decade and the highest-level discussions since the 1979 Islamic Revolution.

Iran’s semi-official Tasnim news agency said that “excessive” US demands had hindered reaching an agreement. Other Iranian media said there was agreement on a number of issues but that the Strait of Hormuz and Iran’s nuclear program were the main points of difference.

Pakistan’s Foreign Minister Ishaq Dar said it was “imperative” to maintain the two-week ceasefire that was agreed on Tuesday as the two sides attempted to wind down a war that began on Feb. 28 with air strikes by the US and Israel on Iran. — A.M.C. Sy with Reuters