Rates of T-bills, bonds may be mixed before Fed
RATES of Treasury bills (Tbills) and Treasury bonds (Tbonds) could be mixed this week after faster-than-expected US inflation reduced expectations of policy easing by the US Federal Reserve this year.
The Bureau of the Treasury (BTr) will auction off P15 billion in T-bills on Monday, or P5 billion each in 91-, 182-, and 364day papers.
On Tuesday, it will offer P30 billion in reissued 20-year Tbonds with a remaining life of 19 years and 11 months.
T-bill and T-bond rates may track the mixed movements in secondary market yields last week amid reduced expectations of policy easing by the Fed this year following the release of the latest US consumer and producer inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Fast money was seen taking profit today following hotter than expected PPI (producer price index) data from the US, which threatens the base case three cuts from the Fed,” a trader said in an e-mail on Friday.
The trader said the 20-year Tbond could see strong demand and fetch an average rate ranging from 6.25% to 6.3%.
At the secondary market on Friday, the 91-day T-bill rose by 0.77 basis point (bp) week on week to yield 5.7729%, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website. Meanwhile, the 182- and 364-day papers went down by 1.68 bps and 8.84 bps to end at 5.7729% and 6.0195%, respectively.
On the other hand, the 20-year bond rose by 4.46 bps week on week to 6.3001%.
The US consumer price index (CPI) increased solidly in February, beating forecasts and suggesting some stickiness in inflation, Reuters reported.
Although the CPI rose 0.4% in February in line with forecasts, a 3.2% year-on-year gain came in just ahead of an expected 3.1% increase. Core figures also topped estimates.
A Labor department report likewise showed the producer price index (PPI) rose by 0.6% month on month in February, compared with a 0.3% increase expected by economists polled by Reuters, amid a surge in the cost of goods like gasoline and food.
It rose by 1.6% in the 12 months to February, versus an estimated growth of 1.1%.
Traders now see a 62% chance of the Fed cutting rates in June, according to the CME FedWatch tool, down from 67% before the PPI data.
The Fed will meet to discuss policy on March 19-20.
The US central bank held its target rate steady at the 5.25-5.5% range for a fourth straight time during its meeting in January. It raised borrowing costs by 525 bps from March 2022 to July 2023.
Last week, the BTr raised P15 billion as planned from the T-bills as total bids reached P50.708 billion, more than thrice the amount on the auction block. — with