YIELDS ON Treasury bills (T-bill) on offer tomorrow will likely move sideways following the decision of the central bank to keep interest rates steady.

The Bureau of the Treasury (BTr) is offering P15 billion worth of Treasury bills (T-bill) on Tuesday, broken down into P4 billion and P5 billion for the three- and six-month instruments, respectively, and P6 billion in one-year papers.

Two traders interviewed expect rates of the T-bills to move sideways from the previous auction.

Last week, the Treasury fully awarded the T-bills on offer, raising P15 billion as planned out of bids worth P43.1 billion.

Rates of the 91-, 182- and 364-day papers went down to 4.453%, 4.856% and 5.05%, respectively.

At the secondary market on Friday, yields on the three-month and six-month debt instruments were at 4.567% and 4.839%, respectively, while the one-year tenor fetched a 5.029% rate.

“We only expect rates to move sideways from the previous auction. The BSP (Bangko Sentral ng Pilipinas) did not hike interest rates during their meeting,” a trader said in a phone interview.

The central bank’s policy-setting Monetary Board left the interest rate on the BSP’s overnight reverse repurchase facility untouched at 4.5%, it announced after its review on Thursday. The interest rates on the overnight lending and deposit facilities were likewise held steady at five percent and four percent, respectively.

“A prudent pause allows the BSP to observe and assess the impact of prior monetary adjustments including the phased reduction in the reserve requirements to be completed by the end of July,” BSP Governor Benjamin E. Diokno said.

At its meeting last May 9, the MB cut key rates by 25 basis points. The BSP also reduced the reserve requirement ratios (RRR) of lenders by a percentage point effective May 31 to 17% for universal and commercial banks, 7% for thrift banks, and 4% for rural and cooperative banks. The reserve ratios of big banks and thrift lenders will be reduced further to settle at 16% and 6%, respectively, on June 28 and July 29.

BSP Deputy Governor Diwa G. Guinigundo said these RRR reductions are expected to unleash a total of P200 billion into the financial system once the phased implementation is completed.

“Since the BSP didn’t cut the rates, we expect yields to move sideways until the market finds fresh leads,” the trader added.

Meanwhile, Robinsons Bank Corp. peso debt trader Kevin S. Palma said yields on the T-bills may move sideways from the previous auction ahead of the release of the BTr’s borrowing plan for the third quarter.

National Treasurer Rosalia V. De Leon earlier said the Treasury’s programmed borrowing for the next quarter will be lower than the April-June program due to “slow” government spending earlier this year.

Despite the sideways movement of yields, Mr. Palma said the auction could be “another will-bid auction” as steepening bias of the local yield curve will continue driven by expectations that the US Federal Reserve may ease its policy rates as soon as July.

“[Y]ou have your usual reinvestment requirement ahead of a P9.3 billion T-bill maturity on July 26 that will further boost demand for the front-end of the curve,” Mr. Palma added.

The government is looking 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 the country’s gross domestic product. — Karl Angelo N. Vidal

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