THE GOVERNMENT on Monday increased the volume of Treasury bills (T-bills) it awarded for the third straight week as rates continued to decline across the board on the back of strong market demand for short-term papers amid heightened 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 P91.06 billion, more than four times as much as the amount on offer but slightly lower than the P93.89 billion in tenders seen on Jan. 20.
The oversubscription led the Treasury to double the accepted non-competitive bids for the three- and six-month debt to P5.6 billion each for the third straight T-bill auction.
Broken down, the Treasury borrowed P9.8 billion via the 91-day T-bills, higher than the programmed P7 billion, as tenders for the tenor reached P32.25 billion. The three-month paper was quoted at an average rate of 5.113%, falling by 42.3 basis points (bps) from the 5.165% seen at the previous auction, with accepted rates ranging from 5.098% to 5.128%.
The government also made a P9.8-billion award of the 182-day securities, above the P7-billion program, as bids stood at P26.65 billion. The average rate of the six-month T-bill stood at 5.488%, dropping by 13.5 bps from the 5.503% fetched previously, with the BTr only accepting bids with this yield.
Lastly, the Treasury raised P8 billion as planned via the 364-day debt papers as demand for the tenor totaled P32.16 billion. The average rate of the one-year debt decreased by 5.1 bps to 5.724% from 5.84% last week, with bids accepted having rates of 5.69% to 5.728%.
At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.3122%, 5.5721%, and 5.8467%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
T-bill average auction yields dropped for the fourth straight week on expectations that the BSP will cut benchmark borrowing costs further in their policy meeting next month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Rates dropped because the market is convinced that BSP may be able to cut rates next month, especially as US President Donald J. Trump seems to be less aggressive when it comes to tariffs, helping tame inflation expectations,” the first trader said in a text message.
“Demand for short-term issuance remained strong amid fluctuating pronouncements by US President Trump on Chinese tariffs following his assumption last week, which accordingly drove yields lower. This rapid change of events continues to prompt investors to adopt a wait-and-see mode to seek returns on T-bills until greater clarity emerges regarding Trump’s policies on tariffs,” the second trader said in an e-mail.
BSP Governor Eli M. Remolona, Jr. earlier said the central bank still has room to continue cutting interest rates as current benchmark borrowing costs remain “restrictive.”
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%.
It will hold its first policy meeting for this year on Feb. 13.
Meanwhile, Mr. Trump suggested a softer stance on tariffs against China, adding to uncertainty about the trade policy that kept equity markets on edge, Reuters reported.
Mr. Trump told Fox News on Thursday his recent conversation with President Xi Jinping was friendly and he thought he could reach a trade deal with China.
Monday’s auction was the last T-bill offering for January. The Treasury raised P104.8 billion from the short-term papers it offered this month, above its P88-billion program, as it upsized its awards at three of its four auctions.
On Tuesday, the BTr will look to raise P35 billion via two Treasury bond (T-bond) tenors. Broken down, it will offer P15 billion in reissued seven-year T-bonds with a remaining life of three years and two months, and P20 billion in new 25-year papers. — A.M.C. Sy with Reuters
