RATES of the Treasury bills (T-bill) to be offered this week may be steady as better-than-expected July inflation data bolstered expectations of further policy easing by the Bangko Sentral ng Pilipinas (BSP).
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion each in 91- and 182-day securities and P9 billion in 364-day papers.
The government has canceled the auction of seven-year Treasury bonds scheduled for Aug. 12 to provide a clear market for its ongoing offering of five-year retail Treasury bonds (RTB).
T-bill rates “could be steady to again slightly lower” and track the sideways week-on-week movements seen at the secondary market after the Philippine July consumer price index (CPI) report and the peso’s recent recovery supported expectations of lower borrowing costs this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Ricafort added that the government’s ongoing public offer of the five-year RTBs that is scheduled to end on Friday could affect demand for the T-bills as it could siphon off some liquidity from the market, but this impact could be offset by the P516 billion worth of previously issued retail bonds that are set to mature on Tuesday.
“Secondary market yields rose on Friday from the previous day’s closing levels amid some profit taking amid the high demand for the ongoing RTB auction, a trader said in an e-mail. “We’re expecting government securities to trade sideways from here with a little downward bias on yields. We estimate BTr to have amassed P399 billion as of [Thursday].”
At the secondary market on Friday, the 91-day T-bill declined by 4.48 basis point (bps) week on week to end at 5.3704%, based on PHP Bloomberg Valuation Service Reference Rates data as of Aug. 8 published on the Philippine Dealing System’s website. Meanwhile, the 182- and 364-day papers inched up by 0.05 bp and 0.29 bp week on week to fetch 5.5575% and 5.6657%, respectively.
Philippine headline inflation rose 0.9% year on year in July, slower than the 1.4% in June and the 4.4% clip in the same month a year ago, the government reported last week.
This was within the BSP’s 0.5% to 1.3% forecast for the month and marked the fifth straight month that the CPI settled below the central bank’s 2-4% target range.
The July print was also below the 1.2% median estimate in a BusinessWorld poll of 17 analysts.
For the first seven months, the CPI averaged 1.7%, a tad higher than the BSP’s 1.6% full-year forecast.
BSP Governor Eli M. Remolona, Jr. told Bloomberg on Tuesday that the benign July inflation reading makes a rate cut “more likely” at the Monetary Board’s Aug. 28 meeting.
“Something unexpected would have to happen for us not to cut rates,” Mr. Remolona said. That will likely be followed by another reduction in the fourth quarter, the governor said.
After this month’s review, the Monetary Board’s remaining meetings for this year are scheduled for Oct. 9 and Dec. 11.
The Monetary Board has lowered benchmark borrowing costs by a total of 50 bps this year via two consecutive 25-bp cuts in April and June, with the policy rate now at 5.25%. This brought cumulative reductions since August 2024 to 125 bps.
Meanwhile, the government raised an initial P210 billion from via its offer of five-year RTBs at the rate-setting auction held last week, with tenders reaching P354.175 billion.
The notes are priced at 6% per annum, payable quarterly.
The public offer period will run until Friday while settlement is on Aug. 20. On Aug. 8, the BTr closed the bond exchange component of the RTB offering and limited the sale of the new retail bonds to individual investors.
National Treasurer Sharon P. Almanza earlier said the government is aiming to raise P300 billion in fresh funds from the RTBs, excluding the volume generated through the bond exchange offer program.
Last week, the BTr raised P28.4 billion from the T-bills it auctioned off, higher than the P25-billion plan as the offer was more than three times oversubscribed, with total bids reaching P87.28 billion.
Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as total tenders for the tenor reached P32.505 billion. The three-month paper was quoted at an average rate of 5.318%, down by 7 bps from the previous auction. Yields accepted ranged from 5.3% to 5.324%.
Meanwhile, the government raised P11.9 billion from the 182-day securities, higher than the P8.5-billion program, as tenders amounted to P29.03 billion. The average rate of the six-month T-bill was at 5.535%, down by 8 bps from the previous week, with accepted yields ranging from 5.53% to 5.545%.
Lastly, the Treasury sold P9.5 billion as programmed in 364-day debt as demand for the tenor totaled P25.745 billion. The average rate of the one-year T-bill went up by 1 bp to 5.637%. Tenders accepted carried rates ranging from 5.61% to 5.645%.
The BTr is looking to raise P185 billion from the domestic market this month, or P125 billion through T-bills and P60 billion via Treasury bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — A.M.C. Sy
