Rates of T-bills, bonds may move sideways as central banks tighten

RATES of government securities to be auctioned off this week are expected to move sideways with a slight upward bias on expectations of global monetary tightening.

The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Monday, or P5 billion each in 91-, 182-, and 364-day securities.

On Tuesday, the BTr will offer P35 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and eight months.

A trader via Viber said that Tbills would move sideways to higher “given hawkish remarks from [the] Fed (US Federal Reserve).”

Rizal Commercial Banking Corp. Michael L. Ricafort likewise said in a Viber message that

T-bills would move sideways to “slightly higher,” amid Fed expectations of greater policy tightening to combat inflation.

A half-point interest rate increase “will be on the table” when the Fed meets on May 3-4 to approve the next in what is expected to be a series of rate increases this year, US Fed Chair Jerome H. Powell said on Thursday in comments that pointed to an aggressive set of actions ahead, Reuters reported.

With inflation running roughly three times the Fed’s 2% target, “it is appropriate to be moving a little more quickly,” Mr. Powell said in a discussion of the global economy at the meetings of the International Monetary Fund.

A Reuters poll two weeks ago showed analysts expect the Fed to make two back-to-back 50-basispoint (bp) interest rate hikes in May and June to bring down runaway inflation.

The Fed’s policy-setting Federal Open Market Committee began to unwind its pandemicdriven easy stance in March when it hiked key rates by 25 bps to tame inflation.

Meanwhile, the trader said the reissued 10-year bonds could fetch an average rate within 6-6.5%.

“The higher forecast is due to [the] BTr’s awarding behavior in last week’s seven-year auction,” the trader said. “Market players are not aggressive on that [10year bond] space given rate hike expectations.”

The BTr made a full award of the reissued seven-year T-bonds it offered last week at a higher average rate due to inflation fears and hawkish comments from Fed policy makers.

The Treasury raised P35 billion as programmed from the reissued seven-year bonds it auctioned off on Tuesday, with bids reaching P47.336 billion.

The debt papers, which have a remaining life of six years and three months, were awarded at an average rate of 5.779%, up by 17.8 bps from the 5.601% fetched when they were last sold on March 22. The bonds have a coupon rate of 3.75%. —