RATES of Treasury bills (T-bills) on offer this week could move sideways as investors amid bets on further monetary easing by the Bangko Sentral ng Pilipinas (BSP) due to slower economic growth in the third quarter.
The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday, or P7 billion in 91-day securities and P7.5 billion each in 182- and 364-day papers.
Yields on the short-term securities could be mixed or little changed, tracking secondary market movements as players priced in their bets on the BSP and US Federal Reserve’s respective policy paths, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Secondary market rates mostly went down week on week following the release of third-quarter Philippine gross domestic product (GDP) data. “Yields on government securities dropped by 5-8 (basis points) after a downward surprise in the third-quarter GDP data. Third-quarter growth slowed to a four-year low on corruption scandals,” a trader said.
However, at the short end, yield movements were mixed. The 91- and 364-day T-bills increased by 4.52 basis points (bps) and 0.19 bp week on week to end at 4.9403% and 5.1800%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Nov. 7 published on the Philippine Dealing System’s website. Meanwhile, the 182-day T-bill went down by 2.06 bps to fetch 5.0760%.
Philippine GDP growth slowed to a more than four-year low of 4% in the third quarter from 5.5% in the second quarter and the 5.2% clip in the same period in 2024, the government reported on Friday. This was well below the 5.3% median estimate in a BusinessWorld poll of 18 analysts and economists.
Officials attributed the weakness to more cautious public spending amid a corruption scandal involving state infrastructure projects, which they said also affected consumer and investor confidence.
Analysts said weak economic prospects and manageable inflation could give the BSP a reason to extend its rate cut cycle.
Last month, the BSP lowered benchmark interest rates by 25 bps for fourth straight meeting to bring the policy rate to 4.75%. It has now trimmed borrowing costs by 175 bps since its rate-cut cycle began in August 2024.
BSP Governor Eli M. Remolona, Jr. has left the door open to further reductions, possibly until next year, as they want to help provide stimulus amid softer economic prospects due to the graft scandal.
Meanwhile, the Fed last month also cut rates by 25 bps to bring its target rate to the 3.75%-4% range.
Fed officials last week continued offering competing views of where the economy stands and the risks facing it in the absence of economic data suspended due to the shutdown, Reuters reported.
Fed funds futures late on Friday were pricing in a roughly 65% chance of a rate cut in December.
Last week, the BTr raised P25 billion from the T-bills it auctioned off, above the P22-billion plan, as the offer was over four times oversubscribed, with total bids reaching P99.095 billion.
Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as total tenders for the tenor reached P30.58 billion. The three-month paper was quoted at an average rate of 4.874%, up by 1.6 bps week on week.
The government also sold the programmed P7.5 billion in 182-day securities as tenders for the tenor totaled P37.255 billion. The average rate of the one-year T-bill inched down by 1.8 bps to 5.026%.
Meanwhile, the Treasury upsized its award of 364-day debt to P10.5 billion from the P7.5-billion plan as the tenor drew demand amounting to P31.26 billion. The average rate of the one-year T-bill inched up by 0.6 to 5.099%.
The BTr is looking to raise P158 billion from the domestic market this month, or P88 billion via T-bills and P70 billion through Treasury bonds.
The government borrows from local and foreign sources to finance its budget deficit, capped at P1.56 trillion or 5.5% of GDP this year. — A.R.A. Inosante with Reuters
