T-bill rates up as shallow easing looms large

Yields on short-dated local debts of the government snapped five straight weeks of decline ahead of the upcoming rate-setting meeting of the Bangko Sentral ng Pilipinas (BSP), amid expectations of a slower pace of easing this year.

But that did not stop the Marcos administration from raising its targeted amount of Treasury bills (T-bills).

Auction results on Monday showed the Bureau of the Treasury (BTr) sold P22 billion in T-bills, as planned.

The offering attracted P50.1 billion in total bids, exceeding the original size of the offer by 2.3 times.

But that did not stop rates from going up. Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said that while the BSP is widely expected to deliver another quarter-point cut at its Feb. 13 policy meeting, the possibility of shallow easing this year loomed large over the market.

As it is, the projected 25-basis point cut this week could be one of the two quarter-point reductions that Governor Eli Remolona Jr. sees for the entire 2025.

“Treasury bill average auction yields corrected slightly higher after declining for five straight weeks ahead of the widely expected -0.25 BSP rate cut,” Ricafort said in a commentary.

“Latest Fed Fund Futures priced in a smaller -0.36 Fed rate cuts by end-2025 on some market concerns that Trump’s plans for higher import tariffs would lead to higher US inflation and fewer future Fed rate cuts,” he added.

Budget deficit

The BTr said the 91-day T-bill fetched an average rate of 5.128 percent, higher than the 5.101 percent seen in the previous auction.

The average rate for the 182-day debt paper also went up to 5.562 percent from 5.477 percent.

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Lastly, local creditors asked for an average yield of 5.726 percent for the one-year T-bill, up from 5.671 percent recorded in the previous week.

For this year, the Marcos administration plans to borrow P2.55 trillion from creditors at home and abroad to plug a projected budget hole amounting to P1.54 trillion, or equivalent to 5.3 percent of the country’s gross domestic product.

By sources of financing, the government will borrow P507.41 billion from foreign investors in 2025. The remaining P2.04 trillion is targeted to be raised domestically, of which P60 billion will be via T-bills and P1.98 trillion via longer-dated Treasury bonds.

All of this, in turn, is expected to push the government’s outstanding debt to P17.35 trillion by the end of 2025.