Treasury bill rates drop across all tenors

The government made a full award of the Treasury bills (T-bills) it offered on Monday at lower rates across the board on strong demand and after softer-than-expected May inflation bolstered views of early rate cuts by the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned from the T-bills it offered on Monday as total bids reached PHP 42.385 billion or almost thrice the amount on the auction block.

Broken down, the BTr borrowed PHP 5 billion as programmed from the 92-day T-bills as tenders for the tenor reached PHP 17.36 billion. The three-month paper was quoted at an average rate of 5.667%, 3.1 basis points (bps) lower than the 5.698% seen last week. Accepted rates ranged from 5.65% to 5.69%.

The government likewise made a full PHP 5-billion award of the 183-day securities, with bids reaching PHP 12.56 billion. The average rate for the six-month T-bill stood at 5.908%, inching up by 0.8 bp from the 5.904% fetched last week, with accepted rates at 5.898% to 5.925%.

Lastly, the Treasury raised the planned PHP 5 billion via the 365-day debt papers as demand for the tenor totaled PHP 12.465 billion. The average rate of the one-year debt went down by 0.7 bp to 6.039% from the 6.046% quoted last week. Accepted yields were from 6.015% to 6.065%.

Maturity dates were adjusted across all tenors due to the June 12 holiday for Independence Day.

The government made a full award of its T-bill offer as the tenor fetched average yields that were “all lower than the prevailing secondary market rates,” the BTr said in a statement.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7038%, 6.0003%, and 6.0814%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The lower offered T-bill rates today reflected increased anticipation of earlier BSP rate cuts following the softer-than-expected Philippine inflation report in May 2024,” a trader said in an e-mail.

Headline inflation quickened for a fourth straight month to 3.9% in May from 3.8% in April, the Philippine Statistics Authority reported last week.

Still, this was slower than the 6.1% print in the same month a year ago. The May consumer price index (CPI) was also within the BSP’s 3.7-4.5% forecast for the month and was a tad lower than the 4% median estimate in a BusinessWorld poll of 16 analysts.

For the first five months, the CPI averaged 3.5%, within the BSP’s target range for the year.

The central bank expects inflation to average 3.5% this year.

BSP Governor Eli M. Remolona, Jr. last week reiterated that the Monetary Board could start cutting rates before the US Federal Reserve despite a weaker peso recently.

Mr. Remolona earlier said the BSP could start its easing cycle with a 25-bp rate cut as early as the Monetary Board’s Aug. 15 meeting and slash rates once or twice in the second semester.

The Monetary Board last month kept its key rate steady at a 17-year high of 6.5%. The central bank raised borrowing costs by 450 bps from May 2022 to October 2023 to bring down inflation.

T-bill rates went down across the board amid easing global crude oil prices recently, which could help keep inflation within the BSP’s target, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

On Tuesday, the government will offer PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and seven months.

The BTr wants to raise PHP 180 billion from the domestic market this month, or PHP 60 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 PHP 1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy with Reuters