RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may end mixed after the Bangko Sentral ng Pilipinas’ (BSP) decision to cut borrowing costs for the first time in almost four years.
The Bureau of the Treasury (BTr) will auction off P20 billion in T-bills on Monday, or P6.5 billion each in 91- and 182-day papers and P7 billion in 364-day debt.
On Tuesday, the government will offer P25 billion in reissued 20-year T-bonds with a remaining life of 14 years and five months.
Yields on the T-bills and T-bonds on offer this week could track the mixed movements in secondary market rates after the BSP kicked off its easing cycle, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Secondary market yields mostly declined on Friday after BSP Governor Eli M. Remolona, Jr. signaled another cut within the year, a trader said in an e-mail.
“We see healthy demand for [this] week’s 14-year auction amid a bullish market, with a current indicative rate of 6.05-6.10%,” the trader added.
At the secondary market on Friday, the rates of the 91-day and 182-day T-bills went up by 10.74 basis points (bps) and 0.96 bp week on week to end at 5.9503%, and 6.1152%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.
Meanwhile, the 364-day paper went down by 4.88 bps week on week to yield 6.1489%.
For its part, the rate of the 20-year bond dropped by 5.43 bps to 6.2663%.
The Monetary Board on Thursday cut its policy rate for the first time in nearly four years amid an improving inflation outlook, with the BSP chief signaling at least one more reduction before the end of the year.
The BSP slashed its target reverse repurchase rate by 25 bps to 6.25%, as expected by nine out of 16 analysts in a BusinessWorld poll. Rates on its overnight deposit and lending facilities were also lowered to 5.75% and 6.75%, respectively.
This was the first time that the Monetary Board cut rates since November 2020, when it delivered a 25-bp cut amid the coronavirus pandemic.
Prior to Thursday’s move, the BSP kept its policy rate at an over 17-year high of 6.5% for six straight meetings following cumulative hikes worth 450 bps between May 2022 and October 2023 to rein in inflation.
“With inflation on a target-consistent path, the current macroeconomic outlook supports a calibrated shift to a less restrictive monetary policy stance,” Mr. Remolona said at a briefing.
The BSP chief said they could cut rates by another 25 bps before yearend. The Monetary Board’s remaining policy-setting meetings this year are scheduled for Oct. 17 and Dec. 19.
Last week, the BTr raised P20 billion as planned from the T-bills it auctioned off as total bids reached P52.535 billion, or more than twice 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 P15.29 billion. The average rate for the three-month papers went up by 7.2 bps week on week to 5.9%. Accepted rates ranged from 5.878% to 5.929%.
The government likewise made a full P6.5-billion award of the 182-day securities as bids for the tenor reached P17.26 billion. The average rate for the six-month T-bill stood at 6.093%, up by 3.1 bps, with accepted rates at 6.074% to 6.1%.
Lastly, the BTr raised the planned P7 billion via the 364-day debt papers as demand totaled P19.985 billion. The average rate of the one-year debt inched down by 1.2 bps to 6.062%.
Meanwhile, the reissued 20-year bonds to be offered on Tuesday were last auctioned off on June 19, where the government borrowed just P24.003 billion out of the planned P30 billion at an average rate of 6.781%, 3.1 bps above the 6.75% coupon rate.
The Treasury wants to raise P220 billion from the domestic market this month. Broken down, it is looking to borrow P80 billion through T-bills and P140 billion via T-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 for this year. — A.M.C. Sy
