Interest rates on T-bills, bonds are expected to rise

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Government bond RATES are expected to rise this week as Russia’s invasion of Ukraine continues to sweep the worldbottleation pressure.

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 be auctioned oonwards P35 billion in newly issued 10-year government bonds (T-Bonds) with a remaining term of nine years and nine months.

A trader said T-bill interest rates are likely to rise 5 to 10 basis points (bps) from the previous auction, while the yield on the 10-year bond could range between 5.8% and 6%.

“Market participants are still cautious on the projected trajectory of Federal Reserve rate hikes, and players continue to monitor the ongoing conflict between Russia and Ukraine,” the trader said of Viber.

“Onshore, Bangko Sentral ng Pilipinas (BSP) said inflation is likely to exceed target this year and is ready to react should it pick upbottleation pressure.”

Another trader said about Viber that government bond prices are likely to move sideways with an upward bias like inbottleThe pressure to innovate remains, especially with another round of local oil price hikes on Tuesday.

“The market will also be awaiting the Bureau of the Treasury’s borrowing plan for April.”

The US Federal Reserve must act “quickly” to bring in interest rates that are too highbottlesaid Federal Reserve Chair Jerome H. Powell last week, adding that it could use bigger rate hikes than usual if needed, Reuters reported.

Specifically, he added, “If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points in one or more sessions, we will do so.”

Fed policymakers hiked interest rates on the US this month fifor the first time in three years and signaled further rate hikes. Most of them see the short-term policy rate – which is locked in near zero for two years – at 1.9% by the end of this year, a pace that could be matched with a quarter-point hike at each of their next six policy meetings.

Meanwhile, the BSP Monetary Board kept interest rates at record lows during its Thursday meeting but said it could rise soon given the risebottleation risks in the war between Russia and Ukraine.

The BSP now expects inbottleto an average of 4.3% this year, which is above the target of 2-4% and the previous estimate of 3.7%.

In the secondary market, Friday’s 91-, 182-, and 364-day T-Bills traded at 1.3212%, 1.5266%, and 1.7378%, respectively, based on PHP Bloomberg Valuation Reference Rates posted on the website of the Philippine Dealing System were released.

Meanwhile, the 10-year maturity returned 5.7193%.

The government partially granted the T-bills it offered last week as interest rates continued to rise in anticipation of further rate hikes by the US Federal Reserve. The BTr raised only 13.9 billion pesos through the short-term securities, or less than the programmed 15 billion pesos.

At a breakdown, the Treasury awarded just P4.87 billion in 91-day T-bills versus the P5 billion on offer, even though total bids reached P9.47 billion. The average rate on three-month T-bills rose 23.1 basis points to 1.536% from 1.305% achieved during the previous auction.

The government also awarded a partial price of 4.03 billion pesos for 364-day paper against the 5 billion pesos or similaronwardsuh, even if the bids totaled 7.7 billion pesos. The average yield on the one-year paper rose 5.8 basis points to 1.792% from 1.734% previously returned.

On the other hand, the BTr borrowed 5 billion pesos as planned via the 182-day T-bills, which attracted 8.74 billion pesos in tenders. The tenor averaged a return of 1.607%, up 14.9 basis points from the 1.458% previously posted.

Meanwhile, the government put the 10-year T-bonds up for auction for the last time, etconwards Tuesday was February 8th. The debt was sold at the auction at an average rate of 5.093%, up 21.8 basis points from the 4.875% when the series was released fifirst oonwardsissued on January 18.

BTr plans to raise P250 billion from the domestic market this month, or P75 billion via T-Bills and P175 billion from T-Bonds. Due to rising yields, however, his auctions saw several rejections and partial bids.

The government borrows from local and external sources to fund a budgetficit limited to 7.7% of gross domestic product this year. — Jenina P. Ibanez

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