RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could decline as weak US data boosted expectations of further monetary easing by the US Federal Reserve.
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8.5 billion each in 91-day and 182-day securities and P8 billion in 364-day papers.
On Tuesday, the government will offer P25 billion in reissued 10-year T-bonds with a remaining life of nine years and seven months.
T-bill and T-bond yields could go down to mirror the week-on-week declines seen at the secondary market on growing Fed cut bets, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Most softer US jobs and other economic data recently increased the urgency of a 25-basis-point (bp) Fed rate cut as early as the next rate-setting meeting on Sept. 17 and as the markets priced in three 25-bp rate cuts for the rest of 2025 after mostly weaker US jobs and other economic data recently,” Mr. Ricafort said.
At the secondary market on Friday, yields on the 91-, 182-, and 364- day T-bills went down by 8.73 bps, 9.92 bps, and 11.68 bps to end at 5.0896%, 5.2143%, and 5.3531%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Sept. 12 published on the Philippine Dealing System’s website.
For its part, the 10-year bond went down by 3.12 bps week on week to yield 5.9702%.
US consumer prices increased by the most in seven months in August amid higher costs for housing and food, but a surge in first-time applications for jobless benefits kept the Federal Reserve on track to cut interest rates next Wednesday, Reuters reported.
The larger-than-expected rise in the consumer price index (CPI) reported by the Labor department on Thursday resulted in the biggest year-on-year increase in inflation since January. Higher inflation and softening labor market conditions fanned fears of stagflation, and pose a dilemma for the US central bank, beyond Wednesday’s anticipated rate decision.
The CPI rose 0.4% last month, the biggest gain since January, after increasing 0.2% in July, the Labor department’s Bureau of Labor Statistics said.
In the 12 months through August, the CPI advanced 2.9%, the largest increase since January, after climbing 2.7% in July.
Economists polled by Reuters had forecast consumer prices would rise 0.3% in August and increase 2.9% on a year-over-year basis.
Financial markets have fully priced in a quarter-percentage-point reduction in rates next Wednesday, with the Fed expected to deliver two similar-sized additional cuts this year.
The US central bank, which tracks the personal consumption expenditures (PCE) price indexes for its 2% inflation target, paused its easing cycle in January because of uncertainty over the inflationary impact of import duties.
Economists estimated that core PCE inflation increased 0.2% in August after rising 0.3% for two straight months, which would translate to an annual increase of 3.1%. That would be an acceleration from a 2.9% increase in July.
The labor market’s struggles were underscored by a separate report from the Labor department showing initial claims for state unemployment benefits jumped 27,000 to a seasonally adjusted 263,000 for the week ended Sept. 6, the highest level since October 2021.
Still, labor market conditions have weakened. The number of people receiving benefits after an initial week of aid was unchanged at 1.939 million during the week ending August 30, the claims report showed.
The government said last week that nonfarm payrolls could have been overstated by 911,000 jobs in the 12 months through March. That followed the release last Friday of the monthly employment report, which showed job growth almost stalled in August and the economy shed jobs in June for the first time in four and a half years amid tariff uncertainty.
Meanwhile, a trader said in an e-mail that the reissued 10-year bonds could fetch an average rate ranging from 5.95% to 5.975% amid decent demand.
“Ultimately, this will be the catalyst for government securities as it should reveal the market’s true appetite for risk. The offering is just P25 billion combined with expectations of a light borrowing calendar for the fourth quarter, yet the local bond market is jittery,” the trader said.
Last week, the BTr raised P25 billion as planned from the T-bills it auctioned off as the offering was more than six times oversubscribed, with total bids reaching P156.428 billion.
The Treasury borrowed P8.5 billion as planned via the 91-day T-bills as total tenders for the tenor reached P37.225 billion. The three-month paper was quoted at an average rate of 5.046%, down by 8.1 bps week on week. Yields accepted ranged from 5% to 5.104%.
The government likewise raised P8.5 billion as programmed from the 182-day securities as tenders amounted to P63.072 billion. The average rate of the six-month T-bill was at 5.222%, falling by 10.1 bps from the previous week, with accepted rates spanning from 5.185% to 5.248%.
Lastly, the Treasury sold the planned P8 billion in 364-day debt as demand for the tenor totaled P56.131 billion. The average rate of the one-year T-bill dropped by 12.7 bps to 5.376%. Tenders awarded carried rates from 5.373% to 5.383%.
Meanwhile, the reissued 10-year T-bonds to be offered on Tuesday were last auctioned off on Aug. 19, where the government raised P25 billion as planned at an average rate of 5.997%, well below the 6.375% coupon rate.
The BTr is looking to raise P220 billion from the domestic market this month, or P100 billion via T-bills and P120 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — Aaron Michael C. Sy with Reuters