Rates of Treasury bills, bonds may drop on BSP policy bets

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could end lower as investors price in their bets for the Bangko Sentral ng Pilipinas’ (BSP) next policy move.

The Bureau of the Treasury (BTr) will auction off P27 billion in T-bills on Monday or P9 billion each in 91-, 182-, and 364-day papers.

On Tuesday, the government will offer P30 billion in reissued seven-year T-bonds with a remaining life of five years and four days.

Yields on the T-bills and T-bonds placed on the auction block could go down and track the week-on-week decline seen at the secondary market on signals from the BSP Governor Eli M. Remolona, Jr. that another rate cut remains on the table next month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This came as headline inflation picked last month but remained below target, which would support further easing, he said.

A trader said in an e-mail that the reissued seven-year bonds could see good demand and fetch rates of 5.675% to 5.725%.

“The government securities (GS) market will likely be stuck in a range until we get more traction on the potential 25-basis-point (bp) rate cut in February,” the trader added.

At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills went down by 5.38 bps, 6.72 bps, and 6.29 bps week on week to end at 4.8009%, 4.9097%, and 4.9746%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Jan. 9 published on the Philippine Dealing System’s website.

Meanwhile, the seven-year bond’s rate eased by 5.69 bps week on week to 5.884%, while the five-year paper, the tenor closest to the remaining life of the T-bonds on offer this week, declined by 6.91 bps to yield 5.7273%.

Last week, Mr. Remolona said a rate cut is “on the table” at the Monetary Board’s Feb. 19 meeting, but could be “unlikely” even as inflation remains benign.

“I can say that we’re very close to where we want to be in terms of policy,” he said. “There’s a chance that we may cut some more, and there’s also a chance that we may not move at all. But there’s not a lot of probability that we will raise in 2026.”

The Monetary Board ended last year with a fifth straight 25-bp cut at its Dec. 11 meeting, bringing the policy rate to 4.5%. It has delivered 200 bps in reductions since it began its rate-cut cycle in August 2024.

The BSP chief has signaled since December that their easing cycle was nearing its end, with further cuts — if any — likely to be limited and data-dependent.

Meanwhile, analysts have said that the central bank could still ease further to help support domestic demand as growth prospects have weakened due to a wide-ranging corruption scandal that has stalled both public and private investments, dragging economic growth.

Last week, the BTr raised P34.2 billion via the T-bills it auctioned off, higher than the P27-billion plan, as the offer was more than four times oversubscribed, with total tenders reaching P108.1 billion.

The BTr doubled its acceptance of noncompetitive bids for the 91- and 182-day T-bills to P7.2 billion each due to strong demand and as average yields were all lower than secondary market rates, it said.

Broken down, the government awarded P12.6 billion in 91-day T-bills, above the P9-billion plan, as demand for the tenor reached P36.235 billion. The three-month paper fetched an average rate of 4.755%, up by 2.4 bps from the previous auction. Yields accepted were from 4.69% to 4.78%.

The Treasury also increased the award for the 182-day debt to P12.6 billion from the P9-billion program as tenders hit P41.15 billion. The average rate of the six-month T-bill was at 4.895%, down by 0.8 bp from the previous week. Tenders awarded carried yields from 4.83% to 4.923%.

Lastly, the BTr sold P9 billion as planned in 364-day securities as the tenor attracted bids totaling P30.715 billion. The one-year paper’s average yield was at 4.937%, up by 1.3 bps from the previous auction. Accepted rates were from 4.875% to 4.937%.

Meanwhile, the reissued seven-year T-bonds to be offered on Tuesday were last auctioned off on April 2, 2024, where the government raised P30 billion as planned at an average rate of 6.299%, above the 6.125% coupon rate.

The BTr is looking to raise P180 billion from the domestic market this month, or P110 billion via T-bills and P70 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy