YIELDS on the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be offered this week could mostly go down ahead of an expected rate cut by the Bangko Sentral ng Pilipinas (BSP) on Thursday.
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Tuesday, or P8 billion in 91-day and 182-day securities and P9 billion in 364-day papers.
On Wednesday, the government is looking to borrow a combined P35 billion via a dual-tranche offering of reissued T-bonds — P10 billion from seven-year papers with a remaining life of two years and seven months, and P25 billion through 25-year notes with a remaining life of 24 years and five months.
This week’s auctions were moved from the usual Monday and Tuesday schedules due to a holiday.
The T-bills and T-bonds on offer could fetch rates in line with comparable secondary market levels, which mostly declined week on week on expectations that the Monetary Board will cut benchmark borrowing costs at its Aug. 28 review, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
A trader said in an e-mail that the reissued seven-year bonds could fetch rates ranging from 5.75% to 5.8%, while the 25-year bonds could be quoted between 6.45% and 6.55%, with the auction expected to attract “decent demand.”
“We expect two-way interest in the next few days heading to the Monetary Board meeting, where a cut is already priced in,” the trader said.
At the secondary market on Friday, yields on the 91-, 182-, and 364- day T-bills dropped by 3.43 basis points (bps), 2.36 bps, and 6.07 bps week on week at 5.2578%, 5.483%, and 5.5985%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Aug. 22 published on the Philippine Dealing System’s website.
The rate of the 25-year bond likewise eased by 6.61 bps week on week to end at 6.3509% on Friday and the seven-year bond inched down by 0.33 bp to yield 5.9221%.
Meanwhile, the three-year paper, the tenor closest to the remaining life of the reissued seven-year T-bonds on offer on Wednesday, edged up by 0.58 bp to fetch 5.7419%.
All 20 analysts in a BusinessWorld poll expect the Monetary Board to reduce the target reverse repurchase rate by 25 bps to 5% at its meeting on Thursday from the current 5.25%.
This would mark the BSP’s third consecutive 25-bp cut since April.
The central bank has lowered benchmark interest rates by a total of 125 bps since it began its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. earlier said a cut is “quite likely” at this week’s meeting and another reduction is also on the table for the remainder of the year.
Last week, the BTr raised P25 billion as planned from the T-bills it auctioned off as the offer was more than four times oversubscribed, with total bids reaching P113.751 billion.
Broken down, the Treasury borrowed P8 billion as planned via the 91-day T-bills as total tenders for the tenor reached P36.58 billion. The three-month paper was quoted at an average rate of 5.234%, down by 5.3 bps from the rate seen in the previous auction. Yields accepted ranged from 5.21% to 5.26%.
The government likewise raised P8 billion as programmed from the 182-day securities as tenders amounted to P40.662 billion. The average rate of the six-month T-bill was at 5.435%, declining by 7.1 bps from the previous week, with accepted yields ranging from 5.433% to 5.438%.
Lastly, the Treasury sold the planned P9 billion in 364-day debt as demand for the tenor totaled P36.509 billion. The average rate of the one-year T-bill dropped by 4.8 bps to 5.564%. Tenders accepted carried rates ranging from 5.55% to 5.572%.
Meanwhile, the BTr last offered the reissued seven-year bonds to be auctioned off this week on July 22, raising P20 billion as planned at an average rate of 5.817%.
On the other hand, the 25-year notes were last sold on June 25, where the government raised just P15.076 billion via the papers, below the P20-billion offer. The bonds fetched an average rate of 6.649%.
The BTr is looking to raise P185 billion from the domestic market this month, or P125 billion through T-bills and P60 billion via T-bonds. This week’s auctions are the last ones for August.
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. — A.M.C. Sy
