Rates of T-bills, bonds may drop with BSP set to cut banks’ RRRs

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may go down after the Bangko Sentral ng Pilipinas (BSP) announced that it will lower banks’ reserve requirement ratios (RRRs) again next month.

The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday, or P7 billion each in 91- and 182-day papers and P8 billion in 364-day papers.

On Tuesday, the government will offer P30 billion in reissued 20-year T-bonds with a remaining life of 19 years and three months.

T-bill and T-bond yields could move lower this week to track the broad decline in secondary market rates on Friday after the BSP announced the RRR cuts, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“About P330 billion will be infused into the banking system. These banks have the option to increase their loans, investments in bonds, equities, foreign exchange, and other assets,” Mr. Ricafort said.

This could result in increased demand for government debt, which would bring yields down, he added.

A trader said that GS yields at the secondary market were mostly moving sideways early on Friday, but the RRR cut announcement prompted last-minute buying at the short end and belly of the yield curve, causing rates to end lower last week.

“We expect same market sentiment [this] week,” the trader said in an e-mail.

The trader added that the 20-year T-bonds to fetch rates ranging from 6.25% to 6.35% and be met with “decent” demand.

At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills rose by 13.56 basis points (bps), 2.79 bps, and 4.58 bps to end at 5.2933%, 5.5920% and 5.7889%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Feb. 21 published on the Philippine Dealing System’s website.

Meanwhile, the rate of the 20-year bond inched up by 1.23 bps to end at 6.3589%.

On Friday, the central bank said it will reduce the reserve requirements for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 bps to 5% from 7% effective March 28.

The RRR for digital banks will likewise be cut by 150 bps to 2.5%, while that for thrift banks will be brought down by 100 bps to 0%.

The central bank last cut banks’ reserve ratios in October 2024.

Last week, the BTr raised P22 billion as planned from the T-bills it auctioned off even as average rates climbed for a second straight week. Total bids reached P56.275 billion, almost thrice as much as the amount on offer.

Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as tenders for the tenor reached P16.05 billion. The three-month paper was quoted at an average rate of 5.318%, rising by 19 bps week on week, with accepted rates ranging from 5.18% to 5.398%.

The government also made a full P7-billion award of the 182-day securities as bids stood at P17.52 billion. The average rate of the six-month T-bill stood at 5.662%, up by 10 bps. Tenders accepted carried yields of 5.58% to 5.695%.

Lastly, the Treasury raised the programmed P8 billion via the 364-day debt papers as demand for the tenor totaled P22.705 billion. The average rate of the one-year debt increased by 5.4 bps to 5.78%, with bids accepted having rates of 5.74% to 5.78%.

Meanwhile, the reissued 20-year bonds to be auctioned off on Tuesday were last offered on Nov. 12, where the BTr raised P15 billion as planned at an average rate of 6.095%, lower than the 6.875% coupon rate.

The Treasury is looking to raise P203 billion from the domestic market this month, or P88 billion from T-bills and P115 billion from T-bonds. The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy