THE GOVERNMENT hiked the volume of Treasury bills (T-bills) it awarded on Monday as rates dropped further on market preference for shorter tenors and amid expectations of a rate cut by the Bangko Sentral ng Pilipinas (BSP) next month.
The Bureau of the Treasury (BTr) raised P27.6 billion from the T-bills it auctioned off on Monday, higher than the initial P22-billion plan, as total bids reached P93.89 billion, more than four times as much as the amount on offer. This was also slightly higher than the P93.776 billion in tenders seen on Jan. 13.
The strong demand led the Treasury to double the accepted non-competitive bids for the three- and six-month T-bills to P5.6 billion each, it said in a statement.
Broken down, the Treasury borrowed P9.8 billion from the 91-day T-bills, higher than the programmed P7 billion, as tenders for the tenor reached P34.41 billion. The three-month paper was quoted at an average rate of 5.165%, falling by 42.3 basis points (bps) from the 5.588% seen at the previous auction, with accepted rates ranging from 5.048% to 5.244%.
The government likewise made a P9.8-billion award of the 182-day securities, above the P7-billion program, as bids stood at P30.25 billion. The average rate of the six-month T-bill stood at 5.503%, dropping by 13.5 bps from the 5.638% fetched previously, with accepted bid rates at 5.423% to 5.58%.
Lastly, the Treasury raised P8 billion as planned via the 364-day debt papers as demand for the tenor totaled P29.23 billion. The average rate of the one-year debt decreased by 5.1 bps to 5.84% from 5.891% last week, with bids accepted carrying rates of 5.82% to 5.845%.
At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.4973%, 5.6265%, and 5.8954%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.
“Treasury bill average auction yields declined for the third straight week after the latest week-on-week decline in most short-term PHP BVAL yields to the lowest in two to three months on a possible local policy rate cut as early as the first BSP rate-setting meeting in 2025,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The government upsized its T-bill award as rates of the debt papers continued to drop amid strong demand, a trader said by phone. “A lot of investors are repositioning in the shorter tenors for the start of the year.”
The Monetary Board will hold its first policy meeting for this year on Feb. 20.
BSP Governor Eli M. Remolona, Jr. this month said the central bank still has room to continue cutting interest rates as inflation is well within its annual goal, adding that current benchmark borrowing costs remain “restrictive.”
He previously said 100 bps worth of cuts this year may be “too much” amid inflation concerns.
The Monetary Board has slashed benchmark borrowing costs by a total of 75 bps since it began its easing cycle in August, bringing its policy rate to 5.75%.
Expectations of further monetary easing by the US Federal Reserve this year following the release of soft economic data also caused T-bill yields to decline, Mr. Ricafort added.
On Tuesday, the BTr will offer P30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 14 days.
The Treasury is looking to raise P213 billion from the domestic market this month, or P88 billion via T-bills and P125 billion through T-bonds.
The government borrows to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy
