T-bills rates down again across-the-board

The Ayuntamiento de Manila which houses the Bureau of the Treasury (From the Facebook account of the bureau)

MANILA, Philippines—T-bill rates further dropped across-the-board on Monday (Jan. 17) as the market preferred short-dated debt papers amid expectations of lower domestic inflation this year and a US rate hike within the first quarter of 2022.

The Bureau of the Treasury fully awarded P15 billion in IOUs, raising P5 billion each from the benchmark 91-, 182-, and 364-day securities.

The average rate for three-month debt paper declined to 0.875 percent from 0.969 percent last week. Six-month treasury bills fetched 1.097 percent, down from 1.121 percent previously. One-year IOUs were awarded at an annual yield of 1.415 percent or lower than last week’s 1.468 percent.

“Rates declined with inflation slowing,” National Treasurer Rosalia de Leon said. Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno last week said headline inflation was expected to be within the 2 to 4 percent target band this year, although the rate would likely be “lower than the midpoint in the first quarter before it goes above the midpoint in the second to fourth quarters.”

Also, De Leon said government securities eligible dealers (GSEDs) were “biased” in favor of short debt tenors, or maturity periods, as the US Federal Reserve was deemed ready to start its rate liftoff.

Markets were bracing for a “taper tantrum redux” as interest rate hikes in developed markets such as the US would flow capital funds back to them, leaving emerging markets like the Philippines.

“Unwinding of easy monetary policies has been anticipated, more so now in the US with its high inflation. Again, Governor [Diokno] has assured that economic recovery will be supported” by a low-interest rate environment in the near term, De Leon said.

Asked if the Philippines would tap the international bond market before rates rise, De Leon replied to reporters: “Let’s see.” The Philippines in 2020 and 2021 started offshore commercial borrowings with relatively low-rate euro bonds, and De Leon said “sentiment may not be different” this year.

Monday’s T-bill auction drew P77.7 billion in tenders across the three tenors, or more than five times of oversubscription.

TSB