T-bill yields inch up before Fed, BSP meetings

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday even as yields rose slightly as investors’ rate-cut expectations have been fully priced in.

The Bureau of the Treasury (BTr) raised P15 billion as planned from the T-bills it auctioned off on Monday as total bids reached P46.74 billion, more than three times as much as the amount on offer. However, this was lower than P56.463 billion in tenders seen the previous week.

Broken down, the Treasury borrowed the programmed P5 billion from the 91-day T-bills as tenders for the tenor reached P15.999 billion. The three-month paper was quoted at an average rate of 5.818%, up by 4.4 basis points (bps) from the 5.774% seen last week, with accepted bids yields ranging from 5.7% to 5.84%.

The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P15.041 billion. The average rate of the six-month T-bill stood at 5.975%, up by 5.3 bps from the 5.922% fetched last week, with accepted rates at 5.9% to 5.99%.

Lastly, the Treasury raised P5 billion as planned via the 364-day debt papers as demand for the tenor totaled P15.7 billion. The average rate of the one-year debt inched up by 0.9 bp to 5.977% from the 5.968% quoted last week, with the tenders accepted having rates ranging from 5.95% to 5.98%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.8404%, 6.0571%, and 6.0739%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.

The government fully awarded its T-bill offer as the yields fetched were “all lower than the prevailing secondary market rates,” the Treasury said in a statement.

T-bill yields were “relatively higher” than those fetched at the previous auction as the market has already priced in a rate cut by the Bangko Sentral ng Pilipinas (BSP) at this week’s policy meeting, a trader said by phone.

The market also expects the BSP to be hawkish in the first quarter of 2025 amid uncertainties, the trader added, although its easing cycle is still likely to continue next year.

“Treasury bill average auction yields were again mostly slightly higher for the 11th straight week, similar to the slight weekly increase in the comparable short-term PHP BVAL yields, despite the widely expected Federal Reserve rate cut and BSP rate cut, amid some premium on crossing-the-year funds as the accounting yearend draws closer due to some balance sheet management,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Still, T-bill rates have “somewhat normalized” and are now close to comparable BVAL levels, he added.

The Fed will hold its last policy review for the year on Dec. 17-18. Markets widely expect another 25-bp cut at this week’s meeting.

The US central bank started its easing cycle in September with a 50-bp cut and followed it up with a 25-bp reduction at its November review, bringing the fed funds rate to the 4.5%-4.75% range.

Meanwhile, the BSP will meet to discuss policy on Dec. 19 (Thursday). A BusinessWorld poll conducted last week showed that 13 out of 16 analysts expect the Monetary Board to reduce benchmark borrowing costs by 25 bps for a third straight meeting, which would bring the policy rate to 5.75%.

The BSP kicked off its rate-cut cycle in August with a 25-bp reduction. It cut borrowing costs by another 25 bps in October to bring the target reverse repurchase rate to 6%.

Monday’s T-bill auction was the last offering of domestic debt for the year. The government raised P1.97 trillion from the local market this year, below its P2.11-trillion domestic borrowing program.

The government borrows to help fund its budget deficit, which is capped at P1.52 trillion or 5.7% of gross domestic product this year. — A.M.C. Sy