Treasury bill rates may continue to rise amid dovish BSP outlook

RATES of Treasury bills (T-bills) to be auctioned off on Monday could continue to increase and track the rise in secondary market yields after the Bangko Sentral ng Pilipinas (BSP) cut benchmark borrowing costs for the second straight time last week and signaled that they prefer to take a “measured approach” in their policy easing cycle.

The Bureau of the Treasury (BTr) will auction off P20 billion in T-bills on Monday, or P6.5 billion in 91- and 182-day papers and P7 billion in 364-day debt.

T-bill rates could mirror the week-on-week rise seen at the secondary market, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The latest policy rate cut could be a major consideration for the upcoming Treasury bill average auction, whose yields are mostly unusually higher versus the comparable short-term PHP BVAL (Bloomberg Valuation Service) yields and could somewhat mitigate the recent week-on-week rise in T-bill average auction yields in recent weeks,” Mr. Ricafort said.

“Less aggressive monetary easing signals could slow down the decline in interest rate returns,” he added.

Secondary market yields were higher on Friday as players continued to lighten their positions, a trader said in an e-mail.

“The same sentiment will likely carry on [this] week in the absence of a catalyst in the near term,” the trader added.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills saw their yields rise by 10.68 basis points (bps), 13.67 bps, and 7.6 bps week on week to end at 5.1499%, 5.5836%, and 5.6926%, respectively, based on PHP BVAL Reference Rates data as of Oct. 18 published on the Philippine Dealing System’s website.

The BSP’s policy-setting Monetary Board on Wednesday cut benchmark interest rates by 25 bps for a second straight meeting, as expected by 16 of 19 analysts in a BusinessWorld poll, as price pressures remain manageable. This brought its policy rate to 6%.

The BSP in August kicked off its easing cycle with a 25-bp reduction, marking its first rate cut in nearly four years.

BSP Governor Eli M. Remolona, Jr. signaled the possibility of another 25-bp cut at the Monetary Board’s last meeting for the year on Dec. 19, which would bring the policy rate to 5.75% by end-2024.

He said a 50-bp reduction in December could be “too aggressive a cut,” except in a hard-landing scenario.

Mr. Remolona added that they could slash rates by 100 bps in 2025, but said they prefer to take “baby steps” in their policy easing cycle.

Last week, the BTr raised P20 billion as planned from the T-bills it auctioned off as total bids reached P51.735 billion or more than twice as much as the amount on offer.

Broken down, the Treasury borrowed P6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P21.415 billion. The average rate for the three-month paper rose by 3 bps to 5.444% from the previous week, with bids ranging from 5.4% to 5.5%.

The government also made a full P6.5-billion award of the 182-day securities, with bids reaching P11.92 billion. The average rate of the six-month T-bill stood at 5.668%, up by 19.4 bps, with accepted bid yields at 5.48% to 5.8%.

Lastly, the Treasury raised P7 billion as planned via the 364-day debt papers as demand for the tenor totaled P18.4 billion. The average rate of the one-year debt went up by 8.3 bps to 5.623%, with accepted rates ranging from 5.6% to 5.674%.

The BTr plans to borrow P145 billion from the domestic market this month, or P100 billion via T-bills and P45 billion through Treasury bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product this year. — A.M.C. Sy