Treasury borrowing rates may rise ahead of retail bond auction

By Aaron Michael C. Sy, Reporter RATES on government securities to be offered this week may rise as expectations of further interest rate increases by the US Federal Reserve put pressure on borrowing costs ahead of the Treasury’s first retail bond sale this year. The Bureau of the Treasury (BTr) will sell as much as P100 billion in short-term securities on Monday, followed by an initial P30-billion offering of 2.5-year retail Treasury bonds (RTB) on Tuesday. Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said rates could track last week’s increases in secondary market yields as investors anticipate further Fed rate hikes. He said the RTBs could carry a coupon rate below 7%, although the recent decline in global crude oil prices could temper the increase in yields. A bond trader, meanwhile, expects the retail bonds to fetch a coupon rate of 7.05% to 7.1%, citing the Fed’s signals that further monetary tightening might be needed. The Treasury will offer P20 billion each in 35- and 65-day cash management bills on Monday. It will also auction P20 billion to P25 billion in 91-day Treasury bills (T-bills), P15 billion to P20 billion in 182-day debt and P7 billion to P15 billion in 364-day securities. Secondary market yields rose across these tenors last week. The 35-, 91-, 182- and 364-day yields increased by 7.87 basis points (bps), 4.77 bps, 2.3 bps and 7.48 bps to 5.1552%, 5.4176%, 5.7811% and 5.9782%, respectively, based on PHP Bloomberg Valuation Service Reference Rates posted on the Philippine Dealing System website. The two- and three-year bond yields also climbed 2.56 bps to 6.6618% and 2.05 bps to 6.9963%, respectively. RETAIL BOND OFFER National Treasurer Sharon P. Almanza earlier said the government aims to raise less than half the P507.16 billion generated from its previous retail bond offering in August 2025, which involved five-year securities. The public offer period for RTB 32 will run from Sept. 29 to Oct. 7, unless closed earlier. Issuance and settlement are scheduled for Oct. 12. The Treasury will also allow holders of selected maturing government securities to exchange their investments for the retail bonds. Eligible securities include RTBs maturing on Oct. 20, March 1, 2027, and March 4, 2027, as well as fixed-rate Treasury notes maturing on Dec. 7 and Jan. 4, 2027. The retail bonds will be sold in minimum denominations of P5,000 and multiples of P5,000 thereafter. Exchange offers will also require a minimum of P5,000, with additional amounts in multiples of P0.01. Last week, the Treasury raised P52 billion from its combined offering of CMBs and T-bills. It borrowed P10 billion as planned through 35-day cash management bills, with tenders reaching P12.177 billion. The securities fetched an average rate of 5.124%, up by 8.8 bps from the previous auction on Sept. 1. The government also raised its P42-billion target from T-bills. It awarded P20 billion in 91-day debt at an average rate of 5.431%, up 8.3 bps from the previous week. The Treasury sold P15 billion in 182-day debt at an average rate of 5.821%, an increase of 4 bps. It also awarded P7 billion in 364-day T-bills at an average rate of 6.043%, up by 12.1 bps. The government plans to raise as much as P380 billion from the domestic market this month, consisting of P250 billion in T-bills and P130 billion in Treasury bonds. It borrows from domestic and foreign lenders to finance its budget deficit, which is capped at P1.659 trillion, equivalent to 5.4% of gross domestic product, this year.