Defying hawkish BSP, T-bill rates slide

The government was able to borrow its target amount of P10 billion during Tuesday’s auction of Treasury bills after rates significantly went down this week despite the recent hawkish signals from the Bangko Sentral ng Pilipinas (BSP).

Auction results showed the T-bills attracted bids amounting to P72.2 billion, 7.2 times bigger than the original size of the offer.

The robust demand, in turn, lowered borrowing costs for the government.

Average yield for the 91-day securities stood at 4.753 percent, a big drop from 6.123 percent seen in the last T-bills sale on Nov. 13.

The 182-day paper, meanwhile, fetched an average rate of 5.181 percent, markedly lower than the 6.513 percent recorded in the previous auction.

Lastly, the average rate for the 364-day T-bill fell to 5.727 percent, from 6.560 percent seen in the last offering.

Apart from the strong appetite of creditors, Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said market expectations that inflation will further slow also helped bring down rates down to levels below the yields quoted for the comparable tenors at the secondary market.

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This, despite the recent statement from BSP Governor Eli Remolona Jr. that the central bank will “remain hawkish for a while” and that it stands ready to resume hiking rates if inflation heats up again.

Moving forward, Ricafort said rates would sustain their downtrend, especially the longer-date debt notes, if “global crude oil prices continue to correct lower for the coming days and if the peso continues to strengthen versus the US dollar toward the Christmas holiday.”

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 the sale of Treasury bonds.