T-bill rates down as market awaits softer inflation data

T-bill rates fell across the board on Monday on expectations of lower September inflation, such that the Bureau of the Treasury raised P22 billion from short-dated IOUs.

The Treasury sold P7 billion in the benchmark 91-day T-bill at an average rate of 1.116 percent, down from 1.121 percent last week.

While the Treasury offered only P5 billion in the three-month IOUs, National Treasu­rer Rosalia V. de Leon said they doubled the noncompetitive bids they accepted, hence the additional P2 billion.

The Treasury also awarded P5 billion in 182-day securities at 1.6 percent, down from 1.601 percent previously.

The P10 billion in 364-day T-bills fetched an annual rate of 1.8 percent, down from 1.858 percent during the previous auction.

De Leon said it helped that P18 billion in government securities matured recently, adding to available market liquidity for reinvesting.

Across the three tenors, tenders totaled P98.9 billion, making the auction oversubscribed by 4.9 times.

According to De Leon, the auction attracted vigorous bids even at lower rates as headline inflation for September is expected to have eased compared to August.

Out of the 11 economists who responded to the Inquirer’s poll last week, seven projec­ted a slower rate of increase in prices of basic commodities last month compared with the 2.4 percent year-on-year recorded in August, which they attribu­ted to lower food and fuel prices.

These economists expect low and stable inflation to help jump-start consumer confidence and spending in a bid to recover from the COVID-19-induced recession.

Capital Economics’ Alex Holmes had the lowest forecast at 2.1 percent year-on-year.

“At the margin, low and stable inflation would help a consumer recovery. But it is likely to be dwarfed by the negative pressure of a continued spread of the coronavirus on consumer sentiment,” Holmes said.

Six economists shared the same projection of 2.3 percent: University of Asia and the Pacific’s Victor A. Abola, HSBC’s Noelan Arbis, Union Bank of the Philippines’ Ruben Carlo O. Asuncion, Sun Life Financial’s Patrick M. Ella, ING Bank’s Nicholas Antonio T. Mapa and ANZ Bank’s Sanjay Mathur.

“Lower inflation by December and unto the first half of 2021 will provide breathing space for consumers and encourage more spending on their part. We sense that they are saving more [due to possible contingencies that may arise in the wake of the pandemic], so low inflation would be a spending booster, which the economy needs,” Abola said.

For Mapa, the slower inflation outlook was “very telling as it paints a protracted period of depressed economic activity.”

Last week, the Bangko Sentral ng Pilipinas lowered its 2020 inflation forecast to 2.3 percent from 2.6 percent previously, alongside lower forecasts for 2021 and 2022. INQ