T-bill rates fell across the board after interest rate cut

MANILA, Philippines — Rates fell across the board after the Bangko Sentral ng Pilipinas (BSP) cut interest rates last week, allowing the Bureau of the Treasury to fully award P15 billion in T-bills Tuesday.

The Treasury sold P4 billion in the benchmark 91-day IOUs at an average rate of 5.389 percent, down from 5.438 percent previously.

It also awarded P5 billion in 182-day T-bills at 5.768 percent, down from 5.825 percent last week.

As for the P6 billion in 364-day treasury bonds, its annual rate declined to 5.936 percent from 5.977 percent a week ago.

Tenders totaled P54.6 billion across the three tenors, making the auction more than three times oversubscribed.

“We’re expecting rates to be lower after the central bank decision. That’s in line with the market feedback that we got prior to the auction – they are anticipating [rates] about 5-10 basis points lower primarily driven by the rate cut last week and possible RRR cut as the Governor [Benjamin E. Diokno] has alluded in the past couple of days,” Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction.

Last Thursday, the BSP’s policy-making Monetary Board cut the policy rate by 25 bps to 4.5 percent as it cited declining inflation, making the outlook “manageable.”

Headline inflation fell to a 16-month low of 3 percent in April, averaging 3.6 percent during the first four months – already within the government’s 3-4 percent target range.

Meanwhile, Sta. Ana said the planned sale of $250 million or about 2.5 billion renminbi in panda bonds may push through this week, just a few days after the government’s euro bond issuance.

“We are still watching the markets now, but as the Treasurer [Rosalia V. de Leon] had mentioned, we may go ahead this week if there’s an opportunity. But we are still looking at the markets at this time. There’s really no pressure for us to launch but rather we are looking for that sweet spot,” Sta. Ana said.

“Obviously, we are in the middle of retaliatory action between the US and China, so we will closely monitor what’s happening as it affects the Chinese interbank market. We’ll see how the benchmark moves in the next hours or days,” he added.

China had vowed “retaliatory” tariffs after the US jacked up import duties to 25 percent from 10 percent previously on $200-billion worth of goods from the mainland amid a trade war between the two economic giants.