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T-bills may fetch lower rates ahead of BSP’s policy review

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YIELDS on Treasury bills (T-bills) on offer today are seen to go down a tad as the market see indications a break in the central bank’s monetary tightening, although some upward pressure still remains over slower economic growth.

The Bureau of the Treasury (BTr) is offering P15 billion worth of short-dated government securities, broken down into P4 billion, P5 billion, and P6 billion for three-month, six-month, and one-year debt notes, respectively.

Traders interviewed noted that inflation has likely peaked already at the start of the fourth quarter, which means the central bank may hold off from hiking interest rates further. This could boost demand for the debt papers and, in turn, cause rates to go down.

“We expect yields for the Treasury bills to fall about slightly by five basis points (bp) primarily because we expect no rate hike, and because the peso is improving. There’s still demand on the short end,” a trader said in a phone interview on Friday. “Inflation might have been contained because of the month to month data which was at 0.3% from 0.8%.”

Inflation steadied at 6.7% in October from the same figure in September, in line with market expectations, but the nine-month average is still elevated at 5.1% — above the central bank’s 2-4% target band. The Bangko Sentral ng Pilipinas’ Monetary Board will hold its rate-setting meeting on Thursday.

Another trader however said yields may still go up as the third-quarter economic growth data was below forecasts.




“[I] expect T-bills yields to inch to 10 bps higher next week given that CPI (consumer price index) seemed to peak but GDP (gross domestic product) is below target. BSP may likely take a break in hiking rate,” the trader said.

GDP growth in the July-September period stood at 6.1%, slower than the 7.2% in the same period last year and a notch slower than the 6.2% second quarter figure. Analysts however expected a 6.3% print. The nine-month average is at 6.3%, from 2017’s 6.8% in the same period, is below the government’s target of 6.5-6.9% for the whole year.

Last week, the BTr fully awarded the P15 billion T-bills with tenders reaching up to P22.95 billion. Average yields rose by 10 bps across all 91-day, 182-day, and 364-day tenors as traders caution before the release of the October inflation data the day after.

The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in Treasury bonds. — Elijah Joseph C. Tubayan

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