T-bill rates may drop on BSP cut

RATES of the Treasury bills (T-bills) on offer this week could end slightly lower after the Bangko Sentral ng Pilipinas (BSP) lowered borrowing costs again and with the US Federal Reserve’s policy path still uncertain.

The Bureau of the Treasury (BTr) will auction off P20 billion in T-bills on Monday, or P6 billion in 91-day securities and P7 billion each in 182- and 364-day papers.

T-bill rates could be little changed or slightly lower to track the marginal decline seen in most short-term yields at the secondary market last week after the BSP’s latest easing move, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He said the BSP chief’s “unexpected” hawkish signals immediately after Thursday’s policy decision initially caused local bond yields to rise, but his “more dovish” comments on Friday caused rates to close the week mostly sideways.

On Friday, the rates of the 91- and 182-day T-bills declined by 0.49 basis point (bp) and 0.01 bp week on week to 4.863% and 4.9989%, respectively, at the secondary market, based on PHP Bloomberg Valuation Service Reference Rates data as of Dec. 12 published on the Philippine Dealing System’s website. Meanwhile, the 364-day T-bill inched up by 0.63 bp to yield 5.0583%.

The Monetary Board last week cut benchmark interest rates by 25 bps for a fifth consecutive meeting to bring the policy rate to 4.5%, the lowest level in more than three years, as expected by 17 out of 18 analysts in a BusinessWorld poll.

The central bank has now lowered borrowing costs by 200 bps since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. said at a briefing after Thursday’s meeting that benign inflation gives them room to help support the economy amid governance concerns that have affected investor sentiment, but added that they are nearing the end of their current easing cycle. He stressed that further cuts — if any — are likely to be limited and dependent on data.

On Friday, the BSP chief left the door open to one last 25-bp reduction, adding that they expect a gradual economic recovery following their previous easing moves.

A bond trader added that the Fed’s “less hawkish” stance caused bonds to rally towards the end of the week, but players unwound their positions after the BSP’s own statement.

“Investment book profit taking is still at large and may linger until yearend and could weigh on sentiment for the rest of the year,” the trader said in an e-mail.

Last week, the Treasury raised P22 billion as planned via T-bills as the offer was more than four times oversubscribed, with total tenders reaching P88.225 billion. 

Broken down, the government raised P7 billion as planned from the 91-day T-bills as the tenor was met with demand worth P30.825 billion. The three-month paper fetched an average rate of 4.759%, down by 5.3 bps from the previous auction. Yields accepted were from 4.712% to 4.828%.

The Treasury also made a full P7.5-billion award of the 182-day debt as bids reached P25.85 billion. The average rate of the six-month T-bill went down by 5.7 bps to 4.873%. Tenders awarded carried yields from 4.83% to 4.963%.

Lastly, the BTr sold the programmed P7.5 billion in 364-day securities as bids for the tenor hit P31.55 billion. The one-year paper’s average yield was at 4.962%, declining by 4.9 bps. Accepted rates were from 4.943% to 4.998%.

The BTr wants to raise P99 billion from the domestic market this month, or P60 billion through T-bills and P35 billion via Treasury bonds. Monday’s T-bill offering is the last government securities auction for the year.

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. — AMCS