T-bill rates ease ahead of expected BSP rate cut

MANILA, Philippines — Treasury bill (T-bill) rates continued to fetch lower rates across all tenors as the Bangko Sentral ng Pilipinas (BSP) is expected to resume its easing cycle on Thursday on the back of the continued downtrend in inflation.

The yield of the 91-day T-bills fell by 37.1 basis points to 3.398 percent at yesterday’s auction from 3.769 percent last July 22, while that of the 182-day tenor also fetched a lower rate of 3.677 percent or 42.3 basis points lower than the previous yield of 4.1 percent.

Likewise, the rate of the 364-day debt paper fell by 62.1 basis points to 3.898 percent yesterday from 4.519 percent last July 22.

Bids for the three tenors reached P87.13 billion or almost six times the issue size of P15 billion.

Tenders for the 91-day T-bills reached P13.35 billion and the auction committee made a full award of P4 billion, while bids for the 182-day tenor amounted to P27.63 billion or more than five times the P5-billion volume.

Furthermore, bids for the one-year T-bills amounted to P46.15 billion or almost eight times the original volume of P6 billion.

 “So we were swarmed by offers not only in terms of the volume, but also in terms of how deep dive the rates are given from average of about 50 basis points even looking at the one year at 62 basis points lower than the previous auction,” National Treasurer Rosalia de Leon said.

De Leon told reporters after the auction the financial system is awash with liquidity as the Bangko Sentral ng Pilipinas (BSP) slashed the level of deposits banks are required to keep with the central bank in May.

The BSP’s lowered the reserve requirement ratio for big and mid-sized banks by 200 basis points in three tranches effective  May 31, June 28, and July 26, while that of small banks was reduced by 100 basis points last May 31.

The reduction, as part of the commitment of former BSP governor Nestor Espenilla Jr. to bring down the level to single digits by 2023, has released about P210 billion in additional liquidity into the financial system to boost economic activity.

De Leon said the BSP and other central banks in the region are on easing mode amid the continued easing of inflation.

The national treasurer said investors expect the BSP’s Monetary Board to slash interest rates anew on Thursday.

“There is also a lot of Asian central banks on the road to easing. And there is also the high probability that the market is also pricing at 25 basis points cut by the central bank when they meet on Aug. 8 for the Monetary Board policy meeting,” she said.