T-bill rates to drop as mart awaits BSP move

TREASURY BILLS (T-bill) on offer tomorrow will likely fetch lower rates as the Bangko Sentral ng Pilipinas (BSP) chief said another rate and reserve requirement ratio (RRR) cut could be implement as early as this month.

The Bureau of the Treasury (BTr) will offer T-bills worth P15 billion on Monday, broken down into P4 billion, P5 billion and P6 billion for the 91- 182- and 364-day papers, respectively.

A trader said on Friday that T-bill rates may decline anew versus the previous auction’s results, with the one-year papers likely to fetch a yield of around 3.5%.

“We are getting more positive feedback on the policy rate cut and RRR cut soon. BSP Governor [Benjamin E.] Diokno did mention that. The market is speculating that it will come by September or October…and it may come simultaneously. That’s why the market is looking for lower rates,” the trader said in a telephone interview.

A second trader said T-bill rates may move sideways following Mr. Diokno’s comment on Friday that the central bank plans to slash policy rates anew this month.

“We expect yields to move sideways from the previous auction. Factors to be considered are recent cut in policy rates and then the news that BSP Governor Diokno mentioned the rate cut will come sooner than later — so that’s possibly a rate cut this month on both policy rate and reserve requirement,” the second trader said over the phone on Friday.

The government raised P15 billion as planned via T-bills at an auction last Sept. 2, with total bids amounting to P40.3 billion.

Broken down, the government raised P4 billion as programmed via the 91-day T-bills, with total tenders amounting to P11.35 billion. The tenor’s average rate declined by 10.5 basis points (bp) to 3.149%.

The Treasury likewise raised P5 billion as planned via the 182-day papers out of bids worth P14.62 billion. The debt papers fetched an average rate of 3.429%, down by 4.2 bps.

For the 364-day T-bills, the government awarded P6 billion as programmed, with total tenders reaching P14.281 billion. The average yield however inched up by 2.3 bps to 3.659%.

Meanwhile, at the secondary market on Friday, the three-month, six-month and one-year T-bills were quoted at 3.345%, 3.513% and 3.699%, respectively, according to the PHP Bloomberg Valuation Service Reference Rates.

Mr. Diokno told reporters on Friday that the central bank’s plan to cut benchmark interest rates anew “won’t reach November.”

“Could be October or September,” Mr. Diokno said.

The BSP chief added that they are still studying whether they will announce and implement the planned cuts to policy rates and big banks’ RRR in one go or in different events.

The central bank’s Monetary Board holds policy-setting meetings every six weeks. Its remaining reviews for the year are scheduled on Sept. 26, Nov. 14 and Dec. 12.

The BSP has cut rates by a total of 50 bps this year — by 25 bps each last May 9 and Aug. 8 — to 4.25% for the overnight reverse repurchase rate, 4.75% for overnight lending and 3.75% for overnight deposit, partially dialing back the 175-bp cumulative hikes triggered last year by successive multi-year high inflation that peaked at a nine-year high.

Mr. Diokno earlier said the central bank is looking to cut policy rates by another 25 bps as well as slash big banks’ reserve ratios before the year ends.

He said the Monetary Board plans to “pre-announce” RRR moves on a quarterly basis to prepare the markets.

Currently, the RRR is at 16% for big banks and six percent for thrift banks following the phased 200-bp cut implemented after an off-cycle meeting last May. The reserve ratio of rural and cooperative lenders was also cut to four percent from five percent effective May 31.

Mr. Diokno has said he is committed to trim universal and commercial banks’ RRR to single digit before his term ends in 2023.

The government is set to borrow P230 billion from the domestic market this quarter through T-bills and Treasury bonds.

It wants to raise P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — BML