T-bill rates may rise after cautious Fed remarks

By Aaron Michael C. Sy, Reporter

TREASURY BILL (T-bill) rates may rise this week despite strong demand after the US Federal Reserve gave cautious signals on its easing cycle.

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

T-bill rates could follow the rise in secondary market yields, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

At the secondary market, the 91-, 182- and 364-day T-bills went up by 6.8 basis points (bps), 5.54 bps, and 8.97 bps to end at 5.5763%, 5.8205%, and 5.8264%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Nov. 15 posted on the Philippine Dealing System’s website.

Yields rose on Friday as the market continued to unwind after cautious comments from Fed Chairman Jerome H. Powell, a trader said in an e-mail. “Offers remained heavy in the past days and will likely spill over into next week despite the lack of auction supply.”

Economic growth, a solid job market and inflation that remains above its 2% target mean the Federal Reserve does not need to rush to lower interest rates, Mr. Powell said on Thursday in remarks that could point to borrowing costs remaining higher for longer for households and businesses alike, Reuters reported.

He said he and his fellow policy makers still considered inflation to be “on a sustainable path to 2%” that will allow the US central bank to move monetary policy “over time to a more neutral setting” that isn’t meant to slow the economy.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” Mr. Powell said in prepared remarks delivered at a Dallas Fed event. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

The US central bank’s next policy meeting is set for Dec. 17-18.

Last week, the BTr raised P20 billion its T-bill auction as total bids reached P59.425 billion, almost thrice as much as the amount on offer.

It borrowed P6.5 billion as planned in 91-day T-bills as tenders reached P23.165 billion. The three-month paper was quoted at an average rate of 5.605%, unchanged from the previous week, with accepted offers carrying yields of 5.59% to 5.62%.

The government also fully awarded P6.5 billion in 182-day securities, with bids reaching P14.615 billion. The average rate of the six-month T-bill stood at 5.752%, up by 1.7 bps, with accepted bid yields at 5.735% to 5.764%

The Treasury raised P7 billion as planned from the 364-day debt as demand hit P21.645 billion. The average rate of the one-year debt inched up by 0.4 bp to 5.79%, with accepted rates ranging from 5.775% to 5.8%.

The Treasury is looking to borrow P90 billion from the domestic market this month — 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.