T-bill rates trek higher as market awaits BSP move

The government was still able to raise its target amount of short-term local borrowings during Monday’s sale of Treasury bills (T-bills) despite higher rates sought by creditors, as the uptick in November inflation led some market watchers to believe that the central bank might hit pause on its easing this month.

Auction results showed the Bureau of the Treasury (BTr) borrowed P15 billion, as planned, via T-bills, which was met with strong demand.

The debt paper attracted P56.5 billion in total tenders, exceeding the original size of the offer by 3.8 times.

But that did not stop domestic creditors from asking for higher rates. A trader said yields went up as some market participants might have priced in a rate cut pause at the Dec. 19 monetary policy meeting of the Bangko Sentral ng Pilipinas (BSP) following the release of higher November inflation.

“The higher awarded T-bill rates reflected increased investor preference for higher short-term returns and growing expectations that the BSP might hold its policy rates steady in the Monetary Board meeting next week,” the trader said.

According to the Treasury, the 91-day T-bill fetched an average rate of 5.774 percent yesterday, more expensive than the 5.630 percent recorded in the previous auction.

Borrowing program

Rates on the 182-day debt paper averaged 5.922 percent, up from 5.905 percent before.

Lastly, investors asked for an average yield of 5.968 percent for the 364-day T-bill, higher than the 5.937 percent seen in the last offering.

For 2024, the Marcos administration had set a P2.57-trillion borrowing program to bridge a budget deficit that is capped at P1.5 trillion, or equivalent to 5.7 percent of gross domestic product.

Figures from the Treasury showed the 10-month fiscal gap stood at P963.9 billion, accounting for 64.94 percent of the deficit limit of the Marcos administration, which is aspiring for an upgrade to “A” credit rating in the coming years.

As a share of the economy, the BTr said the budget shortfall in the first three quarters of the year had stood at a “manageable” level of 5.14 percent, albeit still far from the prepandemic size of 3.38 percent back in 2019.