Treasury and Bond Rates Move Sideways on Inflation Data

RATES on government securities could move sideways this week afterflation eased in January.

The Treasury Office will offer 15 billion pesos in treasury bills (Treasury Notes) on Monday, or 5 billion pesos each in 91-, 182- and 364-day securities.

On Tuesday it will be auctioned off 35 billion pesos in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 11 months.

One trader said Treasury yields could move sideways while 10-year notes could range from 4.95% to 5.1%.

“While inflation has eased, economic data is still expected to continue to show recovery,” the trader said in a Viber message.

“In addition, the Fed (US Federal Reserve) is expected to raise rates in March and local rate hikes may occur in the second half of 2022.”

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said Treasury yields could be flat or slightly lower this week after inflation decelerates.

“The maturity of more than 170 billion pesos in Treasury bills since the end of January 2022 has added to the liquidity in the Iffinancial system,” he added.

Inflation slowed to 3% in January, the fifth consecutive month of deceleration, as housing and utility prices fell, according to preliminary data from the Philippine Statistics Authority. That was slower than December’s 3.2% and January’s 3.7% of last year.

The Bangko Sentral ng Pilipinas (BSP) Monetary Board will meet to review its policy parameters on February 17. It has kept borrowing costs at record highs since November 2020.

BSP Governor Benjamin E. Diokno said the central bank should not raise benchmark rates in the Iffirst half of this year until the economic recovery takes root and unemployment falls.

Meanwhile, the Fed said earlier it would likely raise borrowing costs starting in March to stifle risingflation. Markets expect the US central bank Ifagainff at least three rate hikes this year.

In the secondary market on Friday, 91-day, 182-day and 364-day Treasury bills were quoted at 0.7497%, 1.1249% and 1.4394%, respectively, based on PHP Bloomberg valuation benchmark rates. published on the Philippine Dealing System website.

In contrast, the 10-year bond reached a yield of 4.8805%.

The government raised P15 billion as planned via treasury bills which it auctioned off Last week.

In detail, the Treasury raised 5 billion pesos as programmed via the 91-day securities from 17.2 billion pesos of offers. The average three-month debt securities rate fell 0.2 basis points (bps) to 0.691% from 0.693% the previous week.

The government also borrowed 5 billion pesos as planned through 182-day instruments at 24 billion pesos through tenders. The average six-month Treasury bill rate fell 5.4 basis points to 1.023% from 1.077% previously.

Finally, the BTr awarded all of the 5 billion pesos of the 364-day items as bids reached 18.57 billion pesos. The average one-year paper yield stood at 1.408%, down 0.2bps from 1.41% a week earlier.

Meanwhile, the last time the government offered the 10-year Treasury bond auction on Tuesday was on January 18, when it raised 35 billion pesos as expected as total calls for offers reached 72.24 billion pesos. The debt securities earned a coupon rate of 4.875%.

The Treasury plans to raise 200 billion pesos domestically in February, or 60 billion pesos through treasury bills and 140 billion pesos from treasury bonds.

The government is borrowing from local and external sources to help finance a budget deficit capped at 7.7% of gross domestic product this year. — Jenina P. Ibanez

Garland K. Long