RATES OF Treasury bills (T-bills) on offer today will likely decline following the central bank chief’s hints on a possible policy rate cut.

The Bureau of the Treasury (BTr) is looking to raise P20 billion via its T-bill offering on Monday, broken down into P8 billion in 91-day papers, P6 billion in 182-day notes, and another P6 billion in 364-day securities.

For Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort, the papers may fetch slightly lower rates as the market reacts to hints by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno of a possible cut on benchmark interest rates if related data is favorable.

“Treasury bill auction yields could be steady to slightly lower this coming week after the latest signals from BSP Governor Diokno about a possible cut in local policy rates in the next monetary policy-setting meeting on Dec. 12, 2019 if supported by relatively low inflation data,” Mr. Ricafort said in a phone message on Saturday.

“T-bill auction yields could also be slightly lower after additional peso liquidity infused into the banking system/financial system after the series of RRR (reserve requirement ratio) cuts and matured government bonds worth about P197 billion more than a week ago (Nov. 22, 2019),” Mr. Ricafort added.

On Nov. 18, the BTr raised just P17.99 billion in T-bills out of its P20-billion program as it made a partial award of the 182-day papers while fully awarding the 91- and 364-day securities.

It raised P8 billion as planned via the three-month papers out of total bids worth P18.45 billion, at an average rate of 3.168%.

For the one-year bills, the government awarded P6 billion as programmed, with an average rate of 3.501%, down by 1.2 basis points (bps) from the previous auction’s 3.513%.

Meanwhile, the Treasury only awarded P3.99 billion in six-month papers out of the P6-billion plan, as the rates increased. With the partial award, the papers yielded an average rate of 3.249%, 5.1 bps lower than the 3.198% fetched during the auction last Nov. 4.

At the secondary market on Friday, yields on the three-month, six-month, and one-year T-bills stood at 3.178%, 3.371%, and 3.510%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

Meanwhile, the Philippine Statistics Authority will report inflation data for November on Dec. 5, Thursday.

The overall rise in prices of widely used goods likely quickened in November, the central bank said on Friday, citing higher electricity and fuel costs.

In a statement, the BSP Department of Economic Research said November inflation likely fell between 0.9-1.7%.

The range is beyond the actual 0.8% print in October. However, it is slower than the 6% logged in November 2018.

“The increase in electricity rates as well as higher prices of gasoline, LPG (liquefied petroleum gas) and selected food items are seen as the primary sources of upward price pressures for the month,” the central bank said.

“Meanwhile, inflation could be tempered by lower domestic rice prices and the appreciation of the peso,” it added.

For Robinsons Bank Corp. peso debt trader Kevin S. Palma, T-bill rates will likely move sideways or decline by around 10 bps.

However, Mr. Palma said the auction may still face strong demand with abundant liquidity in the market ahead of the implementation of another reserve requirement ratio cut for the banks.

“Then you also have the news of changes in the deposit substitute, which should also inject liquidity in the system,” he added.

Starting the first reserve week of this month, the RRR for universal and commercial lenders will be at 14%, four percent for thrift banks, while the reserve ratio of nonbank financial institutions with quasi-banking functions be cut to 14%. Meanwhile, the RRR of rural banks will remain at three percent.

Meanwhile, last month, the central bank said its policy-making Monetary Board adopted the new definition for deposit substitutes under Section 95 of its charter that has been amended by Republic Act (RA) 11211 or the New Central Bank Act enacted in February.

With RA 11211, the same provision now defines that the phrase “obtaining funds from the public” means those that involve borrowing from at least 20 lenders at any one time that are individuals or companies which are not financial intermediaries.

“This means that borrowings from banks, quasi-banks and other financial intermediaries are no longer considered deposit substitutes which are subject to reserve requirements,” the BSP said a statement, citing as examples interbank borrowings, repurchase agreements with financial counter-parties, as well as bonds issued to financial intermediaries.”

The BSP last week said this move released about P28 billion in fresh liquidity into the financial system.

The Treasury has set a P220 billion borrowing program this quarter for the local market, broken down into P100 billion in T-bills and P120 billion via Treasury bonds.

The government is planning 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. — Beatrice M. Laforga

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