Benchmark T-bill rates inch up

Yields on Treasury bills rose during Monday’s auction as lenders locked in higher yields ahead of possible rate cut amid dovish signals from the US Federal Reserve.

Even then, the Bureau of the Treasury was able to raise P20 billion as planned, with total demand for the offer hitting P47.4 billion. This was 2.4 times larger than the original issue size.

The average rate for the 91-day T-bill was placed at 5.743 percent, more expensive than the 5.717 percent rate at last week’s auction. The yield for the 181-day T-bill, likewise, rose to 5.991 percent, from 5.978 percent previously.

Meanwhile, local creditors asked for an average rate of 6.081 percent for the 364-day debt notes, higher than the 6.072 percent they demanded last week.

Rizal Commercial Banking Corp. chief economist Michael Ricafort attributed the higher yield on the short-term debt paper to the desire of lenders to get high yields ahead of possible 25-basis point (bps) rate cut as early as August amid easing inflation and prospects of a rate cut in the United States.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said earlier that the Monetary Board may cut rates by 25 bps as early as August and another 25 bps before the end of the year—possibly even ahead of the US Federal Reserve.

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Last week, Fed officials indicated that the US central bank was “closer” to reducing interest rates due to the improved trajectory of inflation and a more balanced labor market. These point to a possible reduction in borrowing costs in September.

The government is looking to raise P215 billion from the local market this month – P100 billion from T-bills and P115 billion via 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 percent of the economic output this year. INQ