By DERCO ROSAL
Interest rates on short-term government debt continued to increase for three consecutive weeks due to falling oil prices, relatively strong investor demand, and anticipation of the reserve requirement ratio (RRR) cut taking effect on Oct. 25.
At Monday’s auction, Oct 21, the Bureau of the Treasury (BTr) successfully raised P20 billion through Treasury bills (T-bills), with total bids reaching P55.1 billion—nearly three times the amount offered.
This week’s total bids increased slightly from last week’s P51.74 billion, continuing the previous increase.
The Treasury awarded the full P6.5 billion for the 91-day T-bills as planned, with total tenders for this maturity reaching P17.61 billion.
Rising slightly by 1.9 basis points (bps), the three-month T-bills were priced at an average rate of 5.463 percent, up from 5.444 percent of the previous week’s auction.
As for the 182-day securities, the government raised P6.5 billion as planned, with bids for this tenor reaching P14.72 billion.
Like last week, the average rate for the six-month T-bill also rose once again to 5.731 percent, up by 6.3 bps from last week’s 5.668 percent rate.
Lastly, the Treasury successfully borrowed the planned P7 billion through the 364-day debt papers, with demand for this maturity reaching P22.74 billion.
Similarly, the average rate for the one-year T-bill inched up by 6.3 bps, from 5.623 percent in the previous auction to 5.686 percent.
Prior to Monday's auction, the PHP Bloomberg Valuation (PHP BVAL) Reference Rates showed that the 91-, 182- and 364-day T-bills were quoted at 5.150 percent, 5.584 percent, and 5.693 percent, respectively.
This week's reference rates for all short-term debts are notably higher than those of previous week, and slightly higher than BVAL rates.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC) said that interest rates on T-bills have been rising for the third week in a row “after the sharp declines in the 2 weeks since the [reserve requirements ratio] RRR cuts were announced” which will take effect on Oct. 25.
However, recently, short-term yields have been lower than these short-term loan rates, except for the one-year T-bill, Ricafort said.
Ricafort pointed out that an unusual situation occurred where the six-month securities had a slightly higher yield (5.731 percent) compared to the one-year debt (5.686 percent).
Normally, longer-term bills have higher yields, but in this case, the strong demand for T-bills may be affecting this outcome, the economist said.
Despite the expected 25 bp cut in the local interest rate on Oct. 17, “average auction yields are still below the latest local policy rate” of 6.0 percent, the economist said.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. recently hinted that they would take a slower, more cautious approach to lowering interest rates.
Ricafort noted that the central bank could lower rates by 25 basis points in December, and there could be a total of one percent worth of rate cuts in 2025, aligning with the U.S. Federal Reserve's projections for future rate cuts.
Global oil prices near three-year lows have alleviated inflation concerns, creating a more favorable environment for gradual interest rate cuts in the coming months.
This decline came after Israel signaled it would avoid striking Iran’s oil and nuclear sites despite rising tensions, potentially allowing central banks to pursue more cautious monetary easing.