15 Dec Yields on Treasury bills may be mixed before Fed, BSP meetings
RATES of Treasury bills (T-bills) to be offered on Monday may be mixed as players await the US Federal Reserve and Bangko Sentral ng Pilipinas’ (BSP) monetary policy decisions this week.
The Bureau of the Treasury (BTr) will auction off P15 billion in T-bills on Monday, or P5 billion each in 91-, 182-, and 364-day papers. This is the last offering of government securities (GS) for 2024.
T-bill yields could track the mixed movements in secondary market rates on Friday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The recent increase in short-term peso interest rates could be partly attributed by crossing-the-year premiums on peso funds amid some window-dressing activities as the accounting year-end draws closer, a consistent pattern seen for many years already,” he added.
At the secondary market on Friday, yields the 91- and 182-day T-bills went up week on week by 14.49 basis points (bps) and 8.47 bps to end at 5.8404% and 6.0571%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Dec. 13 published on the Philippine Dealing System’s website.
Meanwhile, the 364-day paper inched down by 0.65 bp week on week to yield 6.0739%.
“The GS market saw two-way interest [on Friday] on a relatively quiet market following mixed US economic data overnight,” a trader said in an e-mail.
Secondary market yield movements were mostly driven by anticipation for this week’s monetary policy meetings, the trader added.
The Fed will hold its last policy review for the year on Dec. 17-18. Markets fully expect a cut at the upcoming meeting, but only price a roughly 24% chance of another one in January, with March the most likely point for another move, according to CME’s FedWatch tool, Reuters reported.
The US central bank started its easing cycle in September with a 50-bp cut and followed it up with a 25-bp reduction at its November review, bringing the fed funds rate to the 4.5%-4.75% range.
Meanwhile, the BSP will meet to discuss policy on Dec. 19 (Thursday). A BusinessWorld poll conducted last week showed that 13 out of 16 analysts expect the Monetary Board to reduce benchmark borrowing costs by 25 bps for a third straight meeting, which would bring the policy rate to 5.75%.
The BSP kicked off its rate-cut cycle in August with a 25-bp reduction. It cut borrowing costs by another 25 bps in October to bring the target reverse repurchase rate to 6%.
Last week, the BTr raised P15 billion as planned from the T-bills it auctioned off as total bids reached P56.463 billion or almost four times as much as the amount on offer.
Broken down, the Treasury borrowed the programmed P5 billion from the 91-day T-bills as tenders for the tenor reached P13.973 billion. The three-month paper was quoted at an average rate of 5.774%, up by 14.4 bps from a week prior, with accepted bids yields ranging from 5.629% to 5.82%.
The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P16.38 billion. The average rate of the six-month T-bill stood at 5.922%, up by 1.7 bps week on week, with accepted rates at 5.875% to 5.94%.
Lastly, the Treasury raised P5 billion as planned via the 364-day debt papers as demand for the tenor totaled P26.11 billion. The average rate of the one-year debt increased by 3.1 bps to 5.968%, with tenders accepted having rates ranging from 5.938% to 5.988%.
The government borrows to help fund its budget deficit, which is capped at P1.52 trillion or 5.7% of gross domestic product this year. — Aaron Michael C. Sy with Reuters