Treasury bill rates rise as market eyes BSP move

The government made a full award of the Treasury bills (T-bills) it offered on Monday even as rates rose across all tenors on expectations that the Bangko Sentral ng Pilipinas (BSP) could pause its easing cycle this month after headline inflation picked up slightly in November.

The Bureau of the Treasury (BTr) raised P15 billion as planned from the T-bills it auctioned off on Monday as total bids reached PHP 56.463 billion, almost four times as much as the amount on offer. However, this was slightly lower than PHP 57.8 billion in tenders seen the previous week.

Broken down, the Treasury borrowed the programmed PHP 5 billion from the 91-day T-bills as tenders for the tenor reached P13.973 billion. The three-month paper was quoted at an average rate of 5.774%, up by 14.4 basis points (bps) from the 5.63% seen last week, with accepted bids yields ranging from 5.629% to 5.82%.

The government likewise made a full PHP 5-billion award of the 182-day securities, with bids reaching PHP 16.38 billion. The average rate of the six-month T-bill stood at 5.922%, up by 1.7 bps from the 5.905% fetched last week, with accepted rates at 5.875% to 5.94%.

Lastly, the Treasury raised PHP 5 billion as planned via the 364-day debt papers as demand for the tenor totaled PHP 26.11 billion. The average rate of the one-year debt increased by 3.1 bps to 5.968% from the 5.937% quoted last week, with the tenders accepted having rates ranging from 5.938% to 5.988%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.6955%, 5.9724%, and 6.0804%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.

“The higher awarded T-bill rates today reflected increased investor preference for higher short-term returns and growing expectations that the BSP might hold its policy rates steady in the Monetary Board meeting next week,” a trader said in an e-mail on Monday.

“The Treasury bill average auction yields mostly went up for the 10^th straight week after the latest pickup in the local headline inflation,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Mr. Ricafort added that the BTr made a full award of its offer as demand remained strong and as T-bill yields were mostly lower compared to BVAL rates despite the week-on-week increase.

Philippine headline inflation quickened to 2.5% in November from 2.3% in October as typhoons caused higher prices of vegetables, meat and fish, the government reported last week.

Still, this was slower than the 4.1% print in the same month a year ago and was within the central bank’s 2.2%-3% forecast for the month. The November print also matched the median forecast yielded in a BusinessWorld poll of 15 analysts.

For the first 11 months, headline inflation averaged 3.2%, a tad faster than the BSP’s 3.1% full-year baseline forecast but well within its 2-4% annual goal.

The Monetary Board will hold its last meeting for the year on Dec. 19. BSP Governor Eli M. Remolona, Jr. has said that the BSP could opt to pause its easing cycle or deliver another 25-bp rate cut at this month’s review.

Mr. Remolona said inflationary pressures may prompt them to keep rates steady, while a cut is likely if economic growth remains weak.

The BSP has cut benchmark borrowing costs by a total of 50 bps since kicking off its easing cycle in August, bringing its policy rate to 6%.

On Tuesday, the BTr will offer PHP 15 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and one month.

The Treasury is looking to raise PHP 90 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 30 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.52 trillion or 5.7% of gross domestic product this year. — Aaron Michael C. Sy