The interest rates for Treasury bills and bonds that will be available this week may rise even more due to a rise in US yields, which is a result of the US Federal Reserve’s indications of a more aggressive stance.
The government plans to sell P15 billion worth of Treasury bills (T-bills) on Monday, with P5 billion allotted for 91-, 182- and 364-day papers each.
On Tuesday, there will be a reissue of 10-year Treasury bonds (T-bonds) with a remaining term of nine years and 10 months, amounting to P30 billion.
According to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, T-bill and bond yields could rise in response to the secondary market’s recent uptick, driven by high global crude oil prices and concerns of potential escalation in the Israel-Palestine conflict. This was stated in a Viber message.
On Friday, the 91-, 182-, and 364-day T-bills all saw an increase in their rates at the secondary market. According to data from PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website, the rates went up by 13.93 basis points, 1.96 basis points, and 15.33 basis points, respectively. They ended the week at 6.0104%, 6.1654%, and 6.4618%.
The 10-year bond experienced a 6.42 basis point increase in yield, reaching 6.6170% over the course of the week.
According to Mr. Ricafort, the rise in benchmark US Treasury rates last week was a result of hawkish indications from US Federal Reserve Chair Jerome H. Powell.
According to Reuters, the stock market rose by 5% after Mr. Powell made hawkish comments, but concerns about the conflict in the Middle East made investors uneasy.
During a speech at the Economic Club of New York, Mr. Powell discussed the current state of the US economy and how its strong performance and low unemployment rates may necessitate stricter measures for borrowing control.flation.
At its recent meeting, the Federal Reserve decided to maintain its main interest rate within the range of 5.25% to 5.5%.
Since starting its tightening cycle in March of last year, it has raised rates by a total of 525 basis points.
The Federal Open Market Committee’s upcoming meeting will take place from October 31 to November 1 to assess policy.
the next five years
The rates for T-bills and T-bonds may increase as there are expectations that within the next five years, they will be affected.fl
According to a trader’s email, inflation may stay above the central bank’s desired range of 2-4% next year. The trader predicts that the 10-year bond yield will range from 6.875% to 7.0%.
According to the minutes from the Sept. 21 meeting of the Bangko Sentral ng Pilipinas, released last week, the Philippines could potentially fall short of its target annual inflation rate of 2-4%.fl
The goal is to achieve the target for the third consecutive year by 2024.
The Bureau of the Treasury (BTr) raised a total of P11.947 billion last week through its T-bills offering. This fell short of the P15-billion program, despite receiving bids amounting to P19.371 billion.
The Treasury only borrowed P3.637 billion through 91-day T-bills, which is lower than the expected P5 billion.ff
The average interest rate for the three-month paper increased by 18.4 basis points to 5.99%, with accepted rates ranging from 5.85% to 6.10%. Tenders for the tenor amounted to P5.137 billion.
The government only collected P3.31 billion from the 182-day securities, falling short of the P5-billion goal, even though bids for that time frame amounted to P6.52 billion. The average interest rate for the six-month T-bill was 6.207%, a 9.2 basis point increase, with accepted rates ranging from 6.125% to 6.25%.
The BTr successfully sold P5 billion worth of 364-day debt papers, with a demand of P7.714 billion for this tenor. The average interest rate for the one-year T-bill increased by 8.3 basis points to 6.388%. The accepted yields ranged from 6.325% to 6.438%.
nly sold at a yield of 1.5%
The newly released 10-year bonds will only be available for purchase at a yield of 1.5%.ff
The papers that were sold on Tuesday were previously auctioned on Sept. 19, resulting in the government earning the intended P30 billion. The average rate for the papers was 6.42%.
The Bureau of the Treasury plans to collect P150 billion from the local market in the current month, with P60 billion coming from T-bills and P90 billion from T-bonds.
The government obtains loans from both domestic and international sources in order to finance its budget shortfall, which is limited to 6.1% of the country’s total economic output for this fiscal year. – Written by Aaron Michael C. Sy, in collaboration with Reuters.