T-bill, bond rates likely to climb

RATES of the Treasury bills (T-bills) and bonds (T-bonds) on offer this week could continue to rise following the increase in US benchmark yields due to market jitters ahead of the US presidential elections.

The Bureau of the Treasury (BTr) will auction off P20 billion in T-bills on Monday, or P6.5 billion each in 91- and 182-day papers and P7 billion in 364-day debt.

On Tuesday, the government will offer P15 billion in reissued 10-year T-bonds with a remaining life of nine years and two months.

The T-bonds could fetch yields ranging from 5.8% to 5.85% this week amid high demand as the paper on offer is illiquid and has limited volume up for grabs, a trader said.

T-bill and bond rates could mirror the increase in secondary market rates last week amid higher US treasury yields “as the markets are pricing in a possible Trump victory in the upcoming US presidential elections,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, rates of the 91-, 182-, and 364-day T-bills went up by 4.8 basis points (bps), 21.77 bps, and 3.66 bps to end at 5.1979%, 5.8013, and 5.7292%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Oct. 25 published on the Philippine Dealing System’s website.

Meanwhile, the 10-year bond saw its yield rise by 9.01 bps week on week to 5.8279%.

Secondary market yields also rose amid lower global crude oil prices recently due to easing tensions in the Middle East, Mr. Ricafort added.

Republican former President Donald Trump and Democratic Vice-President Kamala Harris are polling neck-and-neck in crucial swing states ahead of the Nov. 5 election. Investors are anxious about a contested result roiling world markets and unleashing fresh geopolitical uncertainty, Reuters reported.

Mr. Trump is neck and neck with Ms. Harris in the polls. Yet investors are taking their cues from betting markets, where the odds have shifted in Mr. Trump’s favor.

The dollar has rallied more than 3% so far in October as bond yields have climbed towards three-month highs, partly because markets are preparing for potentially higher US tariffs flagged by Mr. Trump if he wins that could push up inflation and force the Federal Reserve to keep rates higher.

Traders are pricing in near-95% odds of a 25-bp cut at the Fed’s November meeting, according to the CME Group’s FedWatch Tool. The yield on benchmark US 10-year notes rose 3.8 bps to 4.24%.

Meanwhile, oil prices eased about 1% in volatile trade on Thursday on reports the US and Israel will try to restart talks on a possible ceasefire in Gaza, Reuters reported.

Brent futures settled 58 cents, or 0.8%, lower at $74.38 a barrel, while US West Texas Intermediate crude (WTI) slipped 58 cents, or 0.8%, to end at $70.19.

However, oil prices settled higher on Friday and gained 4% on the week, with investors taking stock of the ongoing conflict in the Middle East as well as the US election next month. Brent settled 4% up on the week, while WTI settled 3.7% higher on the week.

Last week, the BTr raised P20 billion as planned from the T-bills it auctioned off as total bids reached P55.069 billion.

Broken down, the Treasury borrowed P6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P17.61 billion. The average rate for the three-month paper rose by 1.9 bps to 5.463% from the previous auction, with bids ranging from 5.398% to 5.463%.

The government also made a full P6.5-billion award of the 182-day securities, with bids reaching P14.72 billion. The average rate of the six-month T-bill stood at 5.731%, up by 6.3 bps, with accepted bid yields at 5.6% to 5.78%

Lastly, the Treasury raised P7 billion as planned via the 364-day debt papers as demand for the tenor totaled P22.739 billion. The average rate of the one-year debt also went up by 6.3 bps to 5.686%, with accepted rates ranging from 5.65% to 5.7%.

Meanwhile, the reissued 10-year bonds on offer on Tuesday were last auctioned off on Sept. 17, where the BTr raised P30 billion as planned at an average rate of 5.967%, below the 6.25% coupon.

The BTr is looking to raise P145 billion from the domestic market this month, or P100 billion via T-bills and P45 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product this year. — A.M.C. Sy with Reuters