Rates of T-bills, bonds may end mixed after slower Q3 growth

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RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could end mixed amid expectations of further rate cuts by the Bangko Sentral ng Pilipinas (BSP) following slower-than-expected gross domestic product (GDP) growth in the third quarter.

The Bureau of the Treasury (BTr) will auction off P20 billion in T-bills on Monday, or P6.5 billion in 91- and 182-day papers and P7 billion in 364-day debt.

On Tuesday, the government will offer P15 billion in reissued 20-year T-bonds with a remaining life of 19 years and six months.

T-bill and bond rates could track the mixed movements in secondary market yields as slower-than-expected Philippine economic growth last quarter report bolstered expectations of another rate cut by the BSP at its December meeting, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Most local financial markets already improved from their worst levels earlier during the week as they already priced in Trump victory in the US presidential election that would lead to more protectionist policies,” Mr. Ricafort added.

At the secondary market, the 91-day T-bill went up week on week by 18.11 basis points (bps) to end at 5.078% on Friday, based on PHP Bloomberg Valuation Service Reference Rates data as of Nov. 8 published on the Philippine Dealing System’s website. Meanwhile, the 182- and 364-day T-bills went down by 3.04 bps and 6.41 bps to end at 5.7651% and 5.7367%, respectively,

For its part, the 20-year bond’s yield rose by 0.72 bp to 6.056%.

The Philippine economy grew by 5.2% in the third quarter, slower than the revised 6.4% expansion in the second quarter and the 6% print in the same period last year, the government reported on Thursday.

This was below the 5.7% median GDP growth forecast in a BusinessWorld poll of 12 analysts.

In the first nine months, GDP growth averaged 5.8%, below the government’s 6-7% annual target. The economy now needs to expand by 6.5% in the fourth quarter to meet this goal.

The economy’s slowdown could open the door for further reductions in benchmark borrowing costs, analysts said.

The Monetary Board has cut rates by 50 bps so far this year since it began its easing cycle in August, bringing its key rate to 6%.

BSP Governor Eli M. Remolona, Jr. earlier signaled a possible 25-bp rate cut at its Dec. 19 meeting, which will be its last for the year. This would bring the policy rate to 5.75% by end-2024.

Meanwhile, US Treasury yields retreated on Friday as investors again cheered Donald Trump’s decisive victory, Reuters reported.

A day after the Federal Reserve delivered a quarter-point rate cut, as anticipated, focus turned back to the fallout of Tuesday’s US election.

US Treasury yields fell after Fed Chair Jerome H. Powell on Thursday signaled continued, patient policy easing, Reuters reported.

The Fed cut rates after a quarter-point cut from the Bank of England and a large half-point cut by Sweden also on Thursday.

Ten-year Treasury yields fell 8.3 basis points to 4.343%, having reversed sharp rises seen following the US election result.

Mr. Powell said Tuesday’s election result would have no “near-term” impact on US monetary policy.

Last week, the BTr raised P20 billion as planned from the T-bills it auctioned off as total bids reached P69.87 billion, more than thrice as much as the amount on offer.

Broken down, the Treasury borrowed P6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P19.155 billion. The average rate for the three-month paper rose by 1.9 bps week on week to 5.605%, with bids ranging from 5.598% to 5.648%.

The government also made a full P6.5-billion award of the 182-day securities, with bids reaching P26.065 billion. The average rate of the six-month T-bill stood at 5.735%, down by 1.7 bps, with accepted bid yields at 5.724% to 5.76%

Lastly, the Treasury raised P7 billion as planned via the 364-day debt papers as demand for the tenor totaled P24.65 billion. The average rate of the one-year debt went up by 3.5 bps to 5.786%, with accepted rates ranging from 5.75% to 5.795%.

Meanwhile, the reissued 20-year bonds on offer on Tuesday were last auctioned off on Sept. 24, where the BTr raised P25 billion as planned at an average rate of 5.861%, below the 6.875% coupon.

The Treasury is looking to borrow P90 billion from the domestic market this month, or P60 billion via T-bills and P30 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product this year. — Aaron Michael C. Sy with Reuters

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