T-bill yields decline as BSP seen keeping rates steady

The Bureau of the Treasury on Monday awarded P17 billion in short-dated treasury bills as rates again declined across the board on expectations that monetary authorities will keep key interest rates steady this week.

The Treasury offered P5 billion each across the three tenors but it doubled the noncompetitive award for the 364-day IOUs, allowing it to sell a bigger P7 billion at an annual rate of 1.563 percent, down from 1.577 percent last week.

The P5 billion in the benchmark 91-day Treasury bills fetched an average rate of 1.078 percent, down from 1.118 percent previously.

The Treasury sold the P5-billion 182-day debt paper at 1.348 percent, down from 1.372 percent.

In all, investors tendered a total of over P59 billion, making the auction almost four times oversubscribed.

“Liquidity remains strong and stable inflation pushed down rates,” National Treasurer Rosalia de Leon said.

The domestic financial market had excess funds coming from P165 billion in government securities, which matured this month.

Headline inflation averaged 4.4 percent year-on-year as of May—above the 2 percent to 4 percent target range, even as the Bangko Sentral ng Pilipinas (BSP) expects the rate of increase in prices of basic commodities to further ease and return within goal during the second half.

“For now, rates [of government-issued debt] will stay low as markets anticipate the Monetary Board to hold rates” when it meets to determine the policy stance on Thursday, De Leon said.

Think tank Moody’s Analytics on Monday forecast the BSP to maintain the policy rate at a record-low 2 percent on June 24.

“The near-term prospects remain worrisome for the Philippines as the country copes with an intense domestic outbreak of COVID-19, which has necessitated the extension of restrictions in the capital city and nearby provinces until the end of June. Although the central bank has responded to the crisis with rate cuts and substantial liquidity easing measures, it is expected to retain ammunition for now and delay further action until restrictions are eased and sectors can respond to new stimulus,” Moody’s Analytics said.

Moody’s Analytics earlier projected the Philippines to be the last in the region to recover output lost due to the pandemic-induced recession, with a revert to prepandemic gross domestic product levels seen only by the third quarter of 2022.