T-bills seen to fetch mixed rates ahead of Fed, BSP policy meets

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Bureau of Treasury (BoT)

RATES OF THE Treasury bills (T-bill) on offer today will likely end mixed amid expectations of policy rate cuts from the local and US central banks.

The Bureau of the Treasury (BTr) is offering P15 billion worth of Treasury bills (T-bill) on Monday, broken down into P4 billion and P5 billion for the three- and six-month instruments, respectively, and P6 billion in one-year papers.

Traders said yields on the T-bills on offer today will likely be mixed, with one saying the 91-day tenor’s rate will likely pick up while the longer-tenored instruments will fetch lower yields from the previous auction.

“For the three-month papers, we expect some uptick because its previous rate was too low. At this point, it might move higher by five basis points (bp) from the previous auction, while the six-month and one-year (T-bills) will move lower by five bps,” a trader said in an interview on Friday.

The government made a full award of the T-bills it offered last July 8, raising P15 billion as planned versus bids amounting to P50.5 billion. Yields on the three-month, six-month and one-year papers dipped to 3.883%, 4.238% and 4.736%, respectively.


Kevin S. Palma, Robinsons Bank Corp. peso debt trader, said the rate of 91-day T-bills may come in higher by 5-10 bps, while average yields of 182- and 364-day securities may move sideways to 10 bps lower from previous auction.

“Hefty demand is highly likely, although market bias is seen on the longer end of the offering in 182- and 364-day papers as market could be locking in relatively higher returns before the Fed (US Federal Reserve) and BSP (Bangko Sentral ng Pilipinas) make their respective policy rate decisions,” Mr. Palma said in a phone message on Saturday.

New York Fed President John Williams said in a speech on Thursday that the US central bank needs to take “preventative measures” while interest rates are down and economic growth is easing than “to wait for disaster to unfold.”

His comment strengthens the case for a half-a-percentage-point cut in interest rates during Fed’s policy meeting later this month.

Fed chair Jerome Powell previously hinted on a cut in benchmark rates, saying the central bank will “act as appropriate” to sustain growth amid “crosscurrents.”

The BSP is also expected to cut interest rates when the policy-making Monetary Board convenes again next month. BSP Governor Benjamin E. Diokno earlier said the regulator is likely to cut policy rates in the second half before moving to reduce banks’ reserve requirement ratio.

Last week, Mr. Diokno said a possible 25-bp or 50-bp rate cut from the Fed gives the BSP “and the entire world more policy space for cutting.”

The government plans to borrow P230 billion from the domestic market this quarter, broken down into P90 billion in T-bills and P140 billion in Treasury bonds.

It is looking 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 the country’s gross domestic product. — Karl Angelo N. Vidal