YIELDS on the Treasury bills (T-bills) and Treasury bonds (T-bonds) up for auction this week may end mixed amid inflation and rate hike bets.
The Bureau of the Treasury (BTr) will auction off up to P60 billion in T-bills on Monday, or P20 billion each in 91- and 182-day papers and P10-20 billion in 364-day debt.
It will not sell cash management bills (CMBs) this week after offering them weekly along with T-bills since June 15 to raise additional short-term funds amid heightened market volatility stemming from the Middle East war. The CMBs sold by the government last month had tenors of 35 days and 63 days.
On Tuesday, the government is targeting to raise P30 billion from reissued 20-year T-bonds with a remaining life of five years and 11 days.
Yields on T-bills and T-bonds could track the mixed week-on-week movements at the secondary market, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The upcoming Treasury bill average auction yields could correct slightly lower or (be) little changed after the comparable short-term PHP BVAL (Bloomberg Valuation Service) yields were slightly lower week on week… ahead of the latest consumer price index (CPI) for June 2026 that could ease from 6.8% in May 2026 in view of the sharp decline in global crude oil prices recently that erased almost all of the increases since the war in Iran started on Feb. 28 that also led to large rollback in local fuel pump prices,” he said.
Meanwhile, the reissued 20-year bonds could fetch a higher average yield to match the week-on-week rise in the rate of the five-year debt at the secondary market and track higher US Treasury yields amid possible rate hikes from the Federal Reserve in the coming months following hawkish signals from policy makers, Mr. Ricafort added.
A trader said in an e-mail that the T-bond offer could be well received and fetch rates ranging from 6.9% to 6.95% on “good volume.”
“CPI data will be the catalyst for the near term,” the trader said.
At the secondary market on Friday, yields on the 91-, 182-, and 364- day T-bills went down by 6.83 basis points (bps), 4.35 bps, and 2.84 bps week on week to close at 5.1237%, 5.5307%, and 5.9477%, respectively, according to the PHP BVAL Reference Rates as of July 3 published on the Philippine Dealing System website.
For its part, the 20-year bond rose by 13.79 bps week on week to end at 7.0377% on Friday, while the five-year paper, the tenor closest to the remaining life of the papers on offer this week, went up by 10.07 bps to 6.8291%.
The Philippine Statistics Authority will release the June inflation report on Tuesday (July 7).
Philippine inflation may have cooled for a second straight month to log a three-month low in June as oil and rice prices continued to ease, analysts said. A BusinessWorld poll of 18 analysts yielded a median estimate of 6.6% for the June CPI, slower than the 6.8% in May but faster than 1.4% a year ago.
If realized, this would be within the Bangko Sentral ng Pilipinas’ (BSP) 6%-7% projection for the month and would be the slowest headline print in three months or since the 4.1% in March.
However, this would be the fourth consecutive month that it breached the central bank’s 2%-4% tolerance range.
Meanwhile, Federal Reserve Chairman Kevin Warsh said on Wednesday he will stick firmly to the US central bank’s 2% inflation target and “disappoint” anyone who expects loose monetary policy despite President Donald J. Trump’s call for interest rate cuts, Reuters reported.
Asked if the potential for disappointment extended to Mr. Trump, who picked Mr. Warsh to take over as head of the Fed and has said he expects borrowing costs to fall, Mr. Warsh said, “we have been an independent central bank for a long time. We are going to be an independent central bank at this moment and you will see no changes on that.”
The public appearance in Portugal, Mr. Warsh’s second since taking over as Fed chief in May, saw him join with other top central bankers in what became a common rejection of “forward guidance” and a seeming reluctance even to say much about the economy.
Mr. Warsh said US central bankers will decide whether to raise rates, for example, when they “shut the door” and begin their next two-day meeting on July 28, and told the moderator of the panel she would “fail” to break his rule against commenting about rate decisions or even the risks and factors framing the debate.
Traders slightly trimmed their rate-hike bets as Mr. Warsh spoke, but still put 70% odds on the Fed increasing borrowing costs at its Sept. 15-16 meeting.
Last week, the BTr raised the programmed P60 billion for the Treasury bills it offered as tenders totaled P122.608 billion.
Broken down, the Treasury borrowed P20 billion via the 91-day T-bills as demand for the tenor reached P36.79 billion. The three-month paper fetched an average rate of 5.245%, rising by 2.8 bps from 5.217% from the last auction. Bids accepted had rates from 5.18% to 5.28%.
For the 182-day debt, the government raised P20 billion as tenders reached P41.895 billion. The average rate of the six-month T-bill was at 5.764%, up by 1 bp from 5.754% previously. Tenders awarded carried rates from 5.673% to 5.8%.
Lastly, the BTr also sold P20 billion in 364-day securities as bids for the tenor totaled P43.923 billion. The one-year paper fetched an average rate of 5.968%, down by 6.6 bps from 6.034% in the previous week. Accepted bids had yields from 5.96% to 5.98%.
Meanwhile, the reissued 20-year T-bonds to be offered on Tuesday were last offered on June 2, where the government raised P39.499 billion in total as it made a full P30-billion award at the auction proper and sold an additional P9.499 billion via its tap facility at an average rate of 7.4%, below its 8% coupon rate.
The BTr wants to raise P410 billion from the domestic market this month, or P250 billion via T-bills and P160 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.659 trillion or 5.4% of gross domestic product this year. — Aaron Michael C. Sy with Reuters