Rates of T-bills seen inching up ahead of BSP’s policy meeting

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RATES OF THE Treasury bills (T-bills) on offer today (Sept. 28) will likely inch up as investors seek higher yields as they expect the central bank to keep policy settings steady at its meeting this week.

The Bureau of the Treasury (BTr) is set to borrow P20 billion via T-bills. Broken down, it is looking to raise P5 billion each via the 91-day and 182-day papers and P10 billion from the 346-day instruments.

A trader said T-bill rates may move sideways with an upward bias from the previous auction as the market is still awash with cash, with investors waiting for more economic stimulus as the Bangko Sentral ng Pilipinas (BSP) is seen keeping borrowing costs steady.

“Although the Monetary Board of the BSP is widely expected to keep rates steady for the meeting on Oct. 1, market participants will look for statements and if there’s further guidance to spur economic activity,” the trader said in an e-mail.

The Treasury last week raised P20 billion as planned via the T-bills even as rates rose across-the-board as the offer was more than thrice oversubscribed, with bids amounting to P72.899 billion.


The BTr awarded the programmed P5 billion via the 91-day papers at an average rate of 1.156%, up from 1.15% previously.

It also raised P5 billion as planned from the 182-day T-bills at an average rate of 1.615%, higher than the prior week’s 1.589%.

For the 364-day securities, the Treasury awarded the programmed P10 billion at an average rate of 1.85%, up from 1.807% in the previous auction.

At the secondary market on Friday, the three-month, six-month and one-year papers fetched rates of 1.149%, 1.513%, and 1.841%, respectively, based on the Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the BSP will likely leave benchmark interest rates untouched this Thursday as previous cuts have yet to be completely felt in the financial system, with the central bank seen leaving some room to adjust in case recovery lags.

A BusinessWorld poll held last week showed 14 out of 15 analysts expect the Monetary Board to keep interest rates steady at its meeting on Oct. 1, which is its fifth policy review for the year.

The BSP has cut rates by 175 basis points thus far this year, bringing the rates on its overnight reverse repurchase, lending, and deposit facilities to record lows of 2.25%, 2.75% and 1.75%, respectively.

BSP Governor Benjamin E. Diokno last week said that the central bank may maintain the low interest rate environment in the next two years to support the economy amid the coronavirus pandemic.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa likewise sees an uptick in T-bill rates, saying investors are looking at longer tenors for yield.

“With the copious amount of liquidity in the market signalling rates may be lower for a bit longer, the BTr may opt to be more aggressive in securing long-term funding for what will likely be a decade-long hike back to economic resilience,” Mr. Mapa said in an e-mail.

The Treasury wanted to raise P160 billion from the domestic market this month — P100 billion via weekly auctions of T-bills and P60 billion via Treasury bonds to be offered fortnightly — but has made partial awards and rejections as investors asked for higher rates. Monday’s T-bill auction is its last offering for the month.

The government is looking to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — KKTJ