The T-bill yield is falling as BSP sees keeping interest rates stable

The Bureau of Treasury on Monday allocated P17 billion in short-term government debt bills as interest rates again fell across the board due to expectations that monetary authorities will keep key interest rates stable this week.

Treasury offered P5 billion each across the three tenors, but it doubled the non-competitive price of 364-day IOUs, making it possible to sell a larger P7 billion at an annual rate of 1.563 percent, down from 1.577 percent last week.

P5 mia. In the benchmark 91-day Treasury bills achieved an average interest rate of 1,078 percent, down from 1,118 percent previously.

Treasury sold P5 billion 182-day debt securities at 1,348 percent, down from 1,372 percent.

In total, investors offered a total of over P59 billion, making the auction almost four times oversubscribed.

“Liquidity remains strong and stable inflation pushed rates down,” said National Treasurer Rosalia de Leon.

The domestic financial market had surplus funds from P165 billion. In government securities that expired this month.

Overall inflation averaged 4.4 percent year-on-year in May – above the target range of 2 to 4 percent, although Bangko Sentral ng Pilipinas (BSP) expects the rise in basic commodity prices to further ease and return within goals in the second half.

“For now prices [of government-issued debt] will remain low as markets expect the Monetary Council to hold interest rates ”when it meets to determine its political stance on Thursday, De Leon said.

Think tank Moody’s Analytics on Monday expected BSP to maintain its key interest rate at a record low of 2 percent on June 24.

“The short-term outlook remains worrying for the Philippines as the country copes with an intense domestic outbreak of COVID-19, which has made it necessary to extend the restrictions in the capital and nearby provinces until the end of June. Although the central bank has responded to the crisis with interest rate cuts and significant liquidity measures, it is expected to retain ammunition for the time being and delay further action until restrictions are eased and sectors can respond to new stimulus, ”said Moody’s Analytics.

Moody’s Analytics previously expected the Philippines to be the last in the region to recover lost output due to the pandemic-induced recession, with a return to pre-pandemic gross domestic product levels only seen in the third quarter of 2022.

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