RATES of government securities on offer this week are expected to move sideways with a slight upward bias as the market awaits April inflation data and the result of the US Federal Reserve’s policy meeting on May 3-4.
The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Monday or P5 billion each in 91-, 182- and 364-day securities.
On Tuesday, it will offer P35 billion in reissued three-year Treasury bonds (T-bonds) with a remaining life of two years and 11 months.
“T-bills will just move sideways and possibly mirror last week’s results,” a trader said in a Viber message. “The bond market will have a full plate this week given the release of [the] April consumer price index (CPI) and ahead of the results of the FOMC (Federal Open Market Committee) meeting, where [the] market is expecting a 50-basis-point hike, along with the unveiling of its plan to reduce its balance sheet.”
Meanwhile, the average rate of the three-year papers would likely range between 4.35% and 4.45%, the trader said.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said via Viber that yields on government securities to be auctioned off this week may move sideways with a slight upward bias, similar to secondary market rates.
Mr. Ricafort said possible market catalysts include relatively higher oil prices and hawkish signals from the Bangko Sentral ng Pilipinas (BSP) chief.
He added that the market will also monitor the result of the Fed’s policy review and the April inflation print.
Headline inflation likely climbed beyond the central bank’s target again after five months, as the prolonged war in Ukraine as well as Tropical Storm Agaton caused faster price increases.
A BusinessWorld poll of 17 analysts yielded a median estimate of 4.6% for April inflation, matching the midpoint of the BSP’s 4.2% to 5% forecast.
If realized, this would be faster than the 4% in March and the 4.5% in April 2021. This would also be the first time inflation would go beyond the 2-4% target after the 4.2% print recorded in November.
Analysts said the continued increase in oil prices amid the prolonged conflict in Ukraine as well as weather disruptions likely caused faster price increases last month.
The government will release April inflation data on Thursday, May 5.
On Friday, Brent crude fell 12 cents to settle at $107.14 a barrel, while US West Texas Intermediate (WTI) crude fell 67 cents to settle at $104.69 a barrel, Reuters reported.
Both Brent and WTI rose for the week and posted their fifth straight monthly gain. Brent ended the month up 1.3%, while WTI ended up 4.4%.
Meanwhile, Fed Chairman Jerome H. Powell earlier said they will consider a 50-basis-point (bp) increase during their May 3-4 policy review after the 25-bp hike in March.
At home, BSP Governor Benjamin E. Diokno said in an interview with Bloomberg TV last week that the central bank may consider hiking its record-low interest rates at its June 23 meeting.
This marks a departure from Mr. Diokno’s previous statements that the central bank would only consider normalizing its stance in the second half or when the Philippine economy’s recovery firms up.
The BSP has kept its policy rates at all-time lows since November 2020 to prop up an economy severely affected by the coronavirus pandemic.
At the secondary market on Friday, the 91- 182- and 364-day T-bills fetched yields of 1.2501%, 1.56%, and 1.9332%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.
Meanwhile, the three-year tenor was quoted at 4.15%.
Last week, the BTr fully awarded its T-bill offer as rates mostly went down. Tenders reached P37.64 billion, higher than the P15-billion program.
Broken down, the BTr raised P5 billion as planned via the 91-day securities as it attracted P17.2 billion in tenders. The average rate of the three-month T-bill dropped by 8.3 bps to 1.14% from 1.223% from the previous auction.
The Treasury also made a full P5-billion award of the 182-day debt papers as bids reached P13.44 billion. The average rate of the six-month tenor likewise inched down by 1 bp to 1.558% from 1.568%.
Lastly, the government borrowed P5 billion as programmed from the 364-day instruments from P6.998 billion in tenders. The tepid demand caused the average rate of the one-year paper to go up by 2.4 bps to 1.901% from 1.877% previously.
Meanwhile, the last time the government offered the reissued three-year T-bonds to be auctioned off on Tuesday was on April 5, where it raised just P25.971 billion against the P35-billion program. Tenders for the fresh issuance reached P60.66 billion and the debt papers were awarded at a coupon rate of 4.25%.
The Treasury wants to raise P200 billion from the local market in May, or P60 billion via T-bills and P140 billion through 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