RATES of the Treasury bills (T-bills) to be offered this week could go down as softer-than-expected US consumer inflation data supported expectations of further monetary easing by the US Federal Reserve.
The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday, or P7 billion in 91-day securities, and P7.5 billion each in 182- and 364-day papers.
The T-bills could fetch lower rates to track the week-on-week decline seen at the secondary market amid bets that the Fed would deliver a second straight rate cut this week following the release of soft September US consumer price index (CPI) data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
With the US central bank also expected to continue its easing cycle, this would also support further rate cuts from the Bangko Sentral ng Pilipinas (BSP), he said.
At the secondary market on Friday, yields on the 91-, 182-, and 364-day T-bills went down by 4.45 basis points (bps), 4.03 bps, and 4.05 bps week on week to end at 4.9263%, 5.0977%, and 5.1626%, respectively based on PHP Bloomberg Valuation Service Reference Rates data as of Oct. 24 published on the Philippine Dealing System’s website.
US consumer prices increased slightly less than expected in September as a surge in the cost of gasoline was partially offset by a sharp moderation in rents, keeping the Federal Reserve on track to cut interest rates again this week, Reuters reported.
The report was published despite an economic data blackout caused by the US government shutdown in order to help the Social Security Administration calculate its 2026 cost-of-living adjustment for millions of retirees and other benefits recipients, who will get a 2.8% increase.
It was initially due on Oct. 15 and the White House warned October’s inflation report might not be published for the first time ever because the shutdown had halted data collection.
The consumer price index rose 0.3% last month after climbing 0.4% in August, the Labor Department’s Bureau of Labor Statistics (BLS) said. The BLS said CPI data collection was completed before the shutdown. Still, the statistical agency used imputations to fill in missing information, with the share rising to 40% from 36% in August. A 4.1% jump in the price of gasoline was the main driver of the rise in the CPI.
In the 12 months through September, the CPI increased 3% after advancing 2.9% in August. Economists polled by Reuters had forecast a monthly increase in the CPI of 0.4% and a 3.1% rise on a year-over-year basis.
Excluding the volatile food and energy components, the CPI gained 0.2% after rising 0.3% in August. Slowing rent inflation accounted for the moderation in the so-called core CPI.
Economists estimated consumers so far have absorbed about 20% of the import duties.
They said businesses have refrained from passing on the full costs of tariffs to consumers at the expense of hiring, now a focus of the US central bank, which is expected to lower its benchmark overnight interest rate by another 25 bps to the 3.75%-4% range this Wednesday.
The Fed tracks the personal consumption expenditures (PCE) price indexes for its 2% inflation target. Based on the CPI data, economists estimated core PCE inflation rose 0.2% in September, translating to a 2.9% year-on-year gain.
The ongoing shutdown will, however, delay the release of that data. The second-longest shutdown in history is raising worries over the quality of future inflation reports, given the suspension of collection efforts.
Consumer price data is collected throughout the month, the bulk of it physically, and the shutdown means more than two-thirds of the October data are already missing.
During the 2013 government shutdown, about 75% of the CPI data for the month of October was collected. The BLS is already dealing with resource constraints because of budget and staffing cuts that have led to the suspension of data collection for portions of the CPI basket in some areas across the country.
Meanwhile, the BSP this month lowered benchmark interest rates by 25 bps for a fourth straight time, bringing the policy rate to 4.75%. It has now slashed borrowing costs by a cumulative 175 bps since it began its rate cut cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. said that more reductions are possible in the coming months to help stimulate the economy. The Monetary Board’s next policy meeting is scheduled for Dec. 11.
Last week, the BTr raised P22 billion as planned from the T-bills it auctioned off as the offering was more than four times oversubscribed, with total bids reaching P95.17 billion.
The Treasury awarded P7 billion in 91-day securities as bids reached P26.68 billion. The average yield for the tenor inched up by 0.4 bp to 4.884% from the previous auction, with accepted rates ranging from 4.82% to 4.93%.
It also raised P7.5 billion as programmed from the 182-day T-bills, which attracted P40.63 billion in bids. The six-month paper fetched an average rate of 5.058%, down by 1.4 bps from the previous week. Accepted yields were 5.01% to 5.088%.
Lastly, the government raised P7.5 billion as planned from the 364-day tenor, which drew P27.86 billion in tenders. The one-year bill’s average yield declined by 2.2 bps to 5.097%, with accepted rates at 5.05% to 5.145%.
The BTr is looking to raise P180 billion from the domestic market this month, or P110 billion via T-bills and P70 billion through Treasury bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — Aaron Michael C. Sy with Reuters