YIELDS on government securities on offer this week are expected to increase further in anticipation of rate hikes by the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).
The Bureau of the Treasury (BTr) will offer P15 billion in Treasury bills (T-bills) on Monday, or P5 billion each in 91-, 182- and 364-day securities.
On Tuesday, it will auction off P35 billion in fresh three-year Treasury bonds (T-bonds).
A bond trader said in a Viber message that T-bill rates are likely to move sideways from the previous auction, while the three-year bond could fetch a rate ranging from 4% to 4.250%.
“Market players are still cautious coming in to the week in anticipation of more interest rate hikes by the US Fed and BSP,” the trader added.
“Moreover, the market will also watch this Tuesday’s domestic CPI (consumer price index) print for a lead.”
The BSP chief has said the central bank is looking to end its pandemic-driven accommodative policy by the second half. BSP Governor Benjamin E. Diokno last week signaled the key policy rate could reach up to 2.75% by next year.
The central bank has kept its key rate untouched for the 11th straight meeting last month despite warning that its inflation target might be breached this year due to surging global oil prices brought by the Russia’s invasion of Ukraine.
Analysts said headline inflation likely accelerated in March as the surge in global oil prices amid the Russia-Ukraine war caused faster increases in food and transport costs.
A BusinessWorld poll of 18 analysts yielded a median estimate of 4% for last month’s inflation, nearer the upper end of the central bank’s 3.3% to 4.1% projection.
If realized, this would be faster than the 3% in February and would match the upper end of the 2-4% target of the BSP. Still, it would be slower than the 4.5% seen a year earlier.
The Philippine Statistics Authority will release March inflation data on Tuesday.
Central banks around the world have been tightening their monetary policies to temper inflation even in the face of risks to economic growth.
The Fed hiked its policy rates for the first time since 2018 by 25 basis points (bps) last month to combat its surging inflation that reached a 40-year high. It also signaled more aggressive hikes in the coming meetings.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message that the rise in rates of government debt could be tempered by lower BSP term deposit facility (TDF) auction yields for the past two weeks, the decline in global oil prices, and a stronger peso.
On Friday, global oil prices dipped ahead of a meeting of International Energy Agency member countries to discuss a release of emergency oil reserves alongside the US planned release of up to 1 million barrels of oil per day for six months, Reuters reported.
Brent crude futures were down 6 cents or 0.1% to $104.65 a barrel by 1055 GMT on April 1. US West Texas Intermediate crude futures were down 37 cents or 0.4% at $99.91.
At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.3493%, 1.5347%, and 1.7434%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.
The government partially awarded the T-bills it offered last week as yields continued to rise amid expectations of more aggressive Fed rate hikes.
The BTr only awarded P5 billion in 91-day T-bills at its auction last week even as total tenders reached P35.804 billion, over two times as much as the P15-billion program.
The government raised P5 billion as planned via the 91-day securities as bids reached P17.802 billion. The average rate of the tenor went up by 5.1 bps to 1.587% from 1.536% last week.
Meanwhile, the government did not award 182-day T-bills even as tenders reached P9.4 billion versus the P5-billion program. Had the government made a full award, the average rate of the six-month papers would have gone up by 24.9 bps to 1.856% from the 1.607% fetched at the previous auction.
The government also rejected P8.602 billion in bids for the 364-day debt against the P5-billion plan. Had the BTr fully awarded its offer, the average rate of the one-year T-bill would have increased by 37.5 bps to 2.137% from the 1.792% quoted for the tenor previously.
Meanwhile, the last time the government offered three-year bonds was on March 1 where it rejected all bids as investors asked for higher yields amid rising inflation expectations due to the Russia-Ukraine crisis.
The BTr plans to raise P200 billion from the domestic market this month, or P60 billion via T-bills and P140 billion from T-bonds.
The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — T.J. Tomas with Reuters