T-bill yields rise as BSP says rate cuts still far off

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday at higher rates after the Bangko Sentral ng Pilipinas (BSP) said it is unlikely to cut rates this semester.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned via its offering of T-bills on Monday as total bids reached PHP 34.985 billion or more than twice the amount on the auction block.

Broken down, the Treasury made a full P5-billion award of the 91-day T-bills as tenders for the tenor reached PHP 11.94 billion. The three-month paper was quoted at an average rate of 5.306%, 8 basis points (bps) higher than 5.226% seen last week. Accepted rates ranged from 5.275% to 5.5.35%.

The government raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 10.97 billion. The average rate for the six-month T-bill was at 5.766%, up by 8.1 bps from the 5.685% fetched last week, with accepted rates at 5.743% to 5.795%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt paper as demand for the tenor stood at PHP 12.075 billion. The average rate of the one-year T-bill went up by 3.8 bps to 6.037% from the 5.999% quoted last week. Accepted yields were from 6% to 6.075%.

At the secondary market on Monday before the auctions, the 91-, 182-, and 364-day T-bills were quoted at 5.3587%, 5.6655%, and 5.9991%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

T-bill rates rose on Monday after BSP Governor Eli M. Remolona, Jr., said they are unlikely to bring down benchmark interest rates before June, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The higher tender rates today reflected the prevailing market view that the BSP will unlikely cut policy rates earlier this year, as echoed recently by BSP Governor Remolona,” a trader likewise said in an e-mail on Monday.

Mr. Remolona said over the weekend that it is unlikely that the BSP will begin easing policy rates within the first half amid lingering upside risks to inflation.

The Monetary Board raised borrowing costs by 450 bps from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

The BSP expects headline inflation to average 3.7% this year, slower than 6% seen in 2023.

The central bank will hold its first policy meeting for this year on Feb. 15.

On Tuesday, the BTr will auction off PHP 30 billion in fresh 10-year Treasury bonds (T-bonds).

The Treasury plans to raise PHP 195 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 120 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year or PHP 1.39 trillion. — A.M.C. Sy