T-bill rates slide on better economic data

MANILA  -The government was able to borrow its target amount of P15 billion during Monday’s sale of Treasury bills (T-bills) after yields sought by creditors fell from the previous week on expectations that easing inflation and a faster-than-expected growth last quarter would convince the Bangko Sentral ng Pilipinas (BSP) to slam the brakes on rate hikes.

Auction results showed average yields for short-term debt securities broke seven straight weeks of increase, prompting the Bureau of the Treasury to fully award the T-bills offering.

The offer attracted P46.4 billion in total bids, 3.1 times bigger than the original size of the issuance.

The strong demand from creditors, as well as hopes that the BSP would hit pause on rate hikes at the Monetary Board’s policy meeting later this week, helped the government lock in cheaper borrowing rates, Domini Velasquez, chief economist at China Banking Corp., said.

“Looking ahead, we expect rates to continue to go down as inflation eases until early next year,” Velasquez said.

Two weeks ago, BSP Governor Eli Remolona Jr. said there was a “good chance” that the BSP would keep its policy rate unchanged at the Nov. 16 policy meeting following an off-cycle hike last month, especially if new data would show significant gains in the central bank’s fight against stubbornly high inflation.

READ: Rate hike pause seen likely in November

And it appears that the latest set of economic data is nicer to the BSP this time. Last week, state statisticians reported that inflation cooled for the first time in three months to 4.9 percent year-on-year in October, from 6.1 percent in September. Meanwhile, the economy crushed analysts’ expectations when it grew 5.9 percent year-on-year in the third quarter, stronger than the 4.3-percent annual expansion in the preceding three months.

READ: PH inflation eased to 4.9% in Oct

Broken down, the average yield on the 91-day debt paper fell to 6.123 percent, from 6.352 percent seen last week. The 182-day T-bill, meanwhile, fetched an average rate of 6.513 percent, lower than 6.536 percent quoted in the previous auction.

The average yield on the 364-day securities stood at 6.560 percent, down from last week’s 6.591 percent.

Save for the 6-month debt paper, most T-bill rates are now “slightly lower” than the comparable tenors at the secondary market, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., noted.

“Thus, all these factors would support a pause in local policy rates,” he said.

The Marcos administration plans to borrow P225 billion from domestic lenders in November. Of that amount, P75 billion will be raised via T-bills while P150 billion will come from sale of Treasury bonds. INQ