T-bill rates mixed as more BSP cuts loom

THE GOVERNMENT made a full award of the Treasury bills it auctioned off on Monday at mixed rates amid expectations of further policy easing by the Bangko Sentral ng Pilipinas (BSP) this year.

The Bureau of the Treasury (BTr) raised P25 billion as planned from the T-bills it auctioned off on Monday as total bids reached P78.388 billion, more than thrice the amount on offer and also higher than the P70.345 billion in tenders recorded on May 13.

Broken down, the Treasury borrowed the programmed P8 billion via the 91-day T-bills on Monday as tenders for the tenor reached P24.1 billion. The three-month paper was quoted at an average rate of 5.515%, 3.1 basis points (bps) lower than the 5.546% seen in the previous auction. Tenders accepted by the BTr carried yields of 5.505% to 5.522%.

The government likewise made a full P8-billion award of the 182-day securities it auctioned off as bids for the paper amounted to P34.328 billion. The average rate of the six-month T-bill was at 5.612%, 3.8 bps below the 5.65% fetched last week, with accepted rates ranging from 5.599% to 5.622%.

Lastly, the Treasury raised P9 billion as planned via the 364-day debt papers as demand for the tenor totaled P19.96 billion. The average rate of the one-year T-bill rose by 4.7 bps to 5.702% from 5.655% previously, with the bids awarded having yields of 5.65% to 5.712%.

At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 5.5126%, 5.6257%, and 5.6996%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

The government fully awarded its offering of short-term papers as yields were mostly steady, the first trader said in a text message.

“Only the one-year T-bill’s yield was higher. It looks like investors would rather place their funds in longer tenors to lock in rates rather than the one-year paper,” the trader said.

A second trader said in a phone interview that the T-bill yield movements were mixed as the market is “undecided,” with the one-year debt fetching a higher average rate and lower demand because of the BSP’s dovish outlook.

Still, overall demand was strong, which the second trader said was likely because of the downgrade in the United States’ credit rating.

“There is a chance that foreign investments picked up in the Philippines and other countries,” the trader added.

BSP Governor Eli M. Remolona, Jr. said earlier this month that they are open to cutting rates by a further 75 bps this year amid cooling inflation.

The central bank resumed its easing cycle in April with a 25-bp rate cut, bringing the policy rate to 5.5%. It has now slashed benchmark borrowing costs by a cumulative 100 bps since August last year.

The Monetary Board’s next meeting is scheduled for June 19. Analysts have said that easing inflation and weak economic growth could pave the way for another 25-bp reduction at next month’s review.

Meanwhile, Moody’s downgraded the US sovereign credit rating on Friday due to concerns about the nation’s growing $36-trillion debt pile, in a move that could complicate President Donald J. Trump’s efforts to cut taxes and send ripples through global markets, Reuters reported.

Moody’s first gave the United States its pristine “Aaa” rating in 1919 and is the last of the three major credit agencies to downgrade it.

Friday’s cut by one notch to “Aa1” follows a change in 2023 in the agency’s outlook on the sovereign due to wider fiscal deficits and higher interest payments.

“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s said on Friday, as it changed its outlook on the US to “stable” from “negative.”

On Tuesday, the government will offer P30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 11 months.

The Treasury is looking to raise P260 billion from the domestic market this month, or P100 billion via T-bills and P160 billion through 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. — Aaron Michael C. Sy with Reuters