Treasury bill rates seen steady as central bank halts tightening

Font Size

BoT treasury
Treasury bills will move sideways this week. -- BW FILE PHOTO

RATES of Treasury bills (T-bill) on offer today are expected to move sideways amid steady demand following the decision of the central bank to keep key interest rates steady.

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

Bond traders said the short-term securities on offer today will likely move sideways as investors start to wind down their bids for the year.

“For the bills, I’m looking at sideways movement to five basis points higher [from the previous auction],” a trader said in a phone interview last Friday.

Last week, the Treasury made a full award of the T-bills it placed on the auction block, borrowing P15 billion as planned versus total tenders amounting to P23.549 billion.

The Treasury accepted P4 billion as planned for the 91-day debt papers out of the P7.65 billion offered by banks. The average rate declined by 4.4 bps to 5.35% from the 5.394% quoted in the previous offer.

The government also made a full award of the 181-day T-bills, borrowing P5 billion as planned versus total offers of 8.525 billion. The average yield rose 3.9 basis points to 6.344% from 6.305% previously.

It also fully awarded the 364-day papers, accepting P6 billion out of the total bids at P7.374 billion. Its average yield climbed 7.8 bps to 6.585% from the 6.507% tallied in the previous auction.

According to the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 5.651%, 6.36% and 6.703%, respectively, on Friday.

“The rates will move sideways since the recent decision of the MB (Monetary Board) was already expected given the low inflation,” the trader added.

The Bangko Sentral ng Pilipinas (BSP) kept its benchmark rates steady on Thursday, holding its interest rates at a nine-year high 4.25-5.25%.

Last week’s policy decision marks the end of the BSP’s five straight tightening moves this year as inflation is seen to decelerate faster than initially expected.

BSP Assistant Governor Francisco G. Dakila, Jr. said in a press briefing on Thursday that the central bank projects inflation to return to “below four percent by around the end of Q1 2019,” well within the government’s 2-4% target band.

“The demand for the bills will be lighter as we usher in the holidays. Some of the clients will likely hold their cash until next year by January,” the trader said.

Meanwhile, another trader said market participants will also take into consideration the Federal Reserve’s policy meeting on Dec. 18-19, where the US central bank is expected to raise rates anew.

“If the Fed will also take a pause, then it might give some relief rally,” the trader added.

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.

This is part of a P888.23-billion borrowing plan this year from local and foreign sources to fund the budget deficit and support increased government spending.