RATES OF Treasury bills (T-bills) to be auctioned off this week will likely move sideways as the central bank signaled a pause in monetary easing, with inflation slowing last month.

The Bureau of the Treasury (BTr) on Monday will offer P20 billion in T-bills, broken down into P5 billion each in 91- and 182-day papers and P10 billion in 364-day securities.

On Tuesday, the BTr is planning to borrow P15 billion via the 35-day papers.

Noel S. Reyes, first vice-president and chief investment officer of the Asset Management Group at Security Bank Corp., said yields on these short-term papers will likely move sideways or inch slightly lower from the previous auction.

“BSP (Bangko Sentral ng Pilipinas) has already hinted a likely pause in their next meeting and this created a slowdown in major aggressive trends after a decent year-to-date run,” Mr. Reyes said via text on Saturday.

For Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, the rates of the T-bills “could be steady to slightly lower” while the 35-day papers could range within 1.9-2%.

The BTr raised P28 billion in T-bills last week as rates continued to decline across-the-board, also borrowing another P10 billion in one-year papers via the tap facility.

Broken down, it accepted P7 billion in three-month papers out of total bids worth P21.75 billion at an average rate of 2.038%, down from 2.046% previously.

The government borrowed another P7 billion via the six-month papers at a lower average rate of 2.099%.

For the one-year securities, it also increased the awarded volume to P14 billion from the P10-billion plan as bids hit P55 billion, pulling down rates to 2.378%.

Meanwhile, the last time the Treasury offered the 35-day papers was on June 2, raising P15 billion as planned out of total tenders worth P34.4 billion. The T-bills yielded an average rate of 2.065%, up by 4.1 basis points (bps) from the 2.024% seen on May 19.

At the secondary market, the 35-, 91-, 182- and 364-day instruments were quoted at 1.925%, 2.033%, 2.126% and 2.412% on Friday, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

Mr. Ricafort noted that headline inflation’s easing to 2.1% in May will “fundamentally limit any further downside” in yields of these short-term government securities.

Last week, BSP Governor Benjamin E. Diokno hinted they will likely keep benchmark interest rates at current levels for the meantime as inflation continues to ease.

The overnight reverse repurchase rate currently stands at 2.75%, while the overnight lending and deposit rates are at 3.25% and 2.25%, respectively.

The BSP Monetary Board will have its next rate-setting meeting on June 25.

“Other leads/catalysts for include any further relaxation of lockdowns locally, trend in local COVID-19 new cases as the local economy further re-opens, trend in global oil prices (recently among 3-month highs), some pick up in US economic data from the worst levels during the lockdowns such as retail sales (June 16), industrial production (June 16), housing starts (June 17),” Mr. Ricafort said.

A decision on whether the lockdown in Metro Manila will be further eased or tightened anew is expected to be announced this week.

Meanwhile, Security Bank’s Mr. Reyes said market participants are also waiting for the decision of the government on what stimulus package will be adopted and how these will be funded.

“We need further clarity on how the government intends to fund stimulus programs recently passed by Congress to determine new major directional moves,” he said.

Several stimulus bills are currently pending at Congress, two of which are the P1.3-trillion ARISE (Accelerated Recovery and Investments Stimulus for the Economy) which was passed by the House of Representatives early this month and the proposed P140-billion Bayanihan II law pending at the Senate.

The government plans to borrow P170 billion from the local market in June: P110 billion via weekly T-bill auctions and the remaining P60 billion in Treasury bonds to be offered fortnightly. — Beatrice M. Laforga

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