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T-bill rates seen to decline on BSP easing

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TREASURY BILLS (T-bills) to be auctioned off this week will likely fetch lower rates following the 50-basis-point (bp) cut by the Bangko Sentral ng Pilipinas (BSP).

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

On Tuesday, the BTr is set to borrow P15 billion via the 35-day T-bills.

“T-bills should be lower with the BSP move yesterday (Thursday) and bond rally today,” Noel S. Reyes, first vice-president and chief investment officer of the Asset Management Group at Security Bank Corp., said via text on Friday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added the average rate for the T-bills could decline further after the slight easing seen last week. He said the average yield for the 35-day debt papers may settle between 2.05% and 2.15%.

“Inflation rate, currently at 2.1%, could fundamentally set the floor at the moment for the T-bill auction yields and for the 35-day bill auction yield, in able to provide a fair interest rate return for investors,” he said via text.

The BSP on Thursday slashed benchmark rates by 50 bps to record lows of 2.25%, 2.75 and 1.75% for the overnight reverse repurchase, lending and deposit facilities, respectively.

The central bank has cut rates by a cumulative 175 bps this year to help cushion the impact of the pandemic on the economy.

Last week, the BTr raised P20 billion as planned via the T-bills out of the total tenders worth P68.872 billion.

The average rate for the 91-day T-bills inched up to 2.068% from the 2.035% fetched at the June 15 auction.

The 182-day instrument was also quoted at a slightly higher rate of 2.159% from 2.101% previously, while the average yield on the 364-day securities went up to 2.408% from 2.35%.

Meanwhile, the BTr on June 16 made a full award of P15 billion in 35-day T-bills out of nearly P23 billion in bids. The papers fetched an average rate of 2.102%, up 3.6 bps from the 2.065% recorded in the previous auction.

At the secondary market on Friday, the 35-day, three-month, six-month and one-year securities were quoted at 2.103%, 2.127%, 2.199% and 2.563%, respectively, according to the PHL Bloomberg Valuation Service (BVAL) Reference Rates.

Mr. Reyes expects demand for the short-term government securities to remain strong this week after the BSP’s easing move.

“Low rates for longer is our likely scenario as 2Q GDP (gross domestic product) is projected to be a lot softer than 1Q,” he added.

The economy shrank by 0.2% in the first quarter. The economic team is projecting a 2-3.4% contraction in GDP this year..

For Mr. Ricafort, other “major leads/catalysts for (this) week include the trend in new COVID-19 cases locally and in some countries worldwide especially in some US states amid the recent spike, decision by Malacañang on whether or not to further ease the GCQ (general community quarantine) in Metro Manila and in other areas that would lead to further reopening of the local economy.”

He said the market will also watch out for economic data to be released this week, such as reports on liquidity and bank lending growth which BSP is set to release on Tuesday, June 30, as well as manufacturing data that will be out on Wednesday, July 1.

The government has set a P205-billion borrowing program for July and will offer P145 billion in T-bills via its weekly auctions and P60 billion in Treasury bonds to be offered every other week.

It borrows from local and foreign lenders to plug its budget deficit seen to hit 8.4% of GDP this year. — B.M. Laforga





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