THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday as rates dropped across all tenors on robust demand and expectations of further monetary easing by both the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve.
The Bureau of the Treasury (BTr) raised P25 billion as planned from the T-bills it auctioned off as the offer was more than four times oversubscribed, with total bids reaching P113.751 billion. This was also higher than the P94.926 billion in tenders recorded on Aug. 11.
The Auction Committee fully awarded the T-bills as the average rates fetched for the papers were all lower than those seen at the previous auction and prevailing secondary market yields, the BTr said in a statement.
Broken down, the Treasury borrowed P8 billion as planned via the 91-day T-bills as total tenders for the tenor reached P36.58 billion. The three-month paper was quoted at an average rate of 5.234%, down by 5.3 basis points (bps) from the 5.287% seen in the previous auction. Yields accepted ranged from 5.21% to 5.26%.
The government likewise raised P8 billion as programmed from the 182-day securities as tenders amounted to P40.662 billion. The average rate of the six-month T-bill was at 5.435%, declining by 7.1 bps from the 5.506% fetched last week, with accepted yields ranging from 5.433% to 5.438%.
Lastly, the Treasury sold the planned P9 billion in 364-day debt as demand for the tenor totaled P36.509 billion. The average rate of the one-year T-bill dropped by 4.8 bps to 5.564% from 5.612% previously. Tenders accepted carried rates ranging from 5.55% to 5.572%.
At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 5.2921%, 5.5066%, and 5.6592%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
“Treasury bill average auction yields were again mostly slightly lower for the seventh straight week as markets have been anticipating a possible 25-bp BSP rate cut as early as the next rate-setting meeting on Aug. 28, as supported by benign inflation recently,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Growing expectations of policy easing by the Fed next month following the release of a spate of US economic data in the last two weeks also caused T-bill yields to decline, Mr. Ricafort said.
“The upcoming FOMC (Federal Open Market Committee) meeting may confirm more upcoming rate cuts this year, affecting the market’s buying sentiment greatly,” a trader said in a text message.
BSP Governor Eli M. Remolona, Jr. said last week that a rate cut is “quite likely” at the Monetary Board’s meeting next week as they expect inflation to remain within target this year.
He also said that they are expecting to deliver only two more rate cuts this year, including the one they could implement this month. After this month’s review, the Monetary Board’s remaining meetings for this year are scheduled for Oct. 9 and Dec. 11.
The BSP has lowered benchmark interest rates by a cumulative 125 bps since August 2024, with the policy rate now at 5.25%.
Philippine headline inflation slowed to a near six-year low of 0.9% in July, marking the fifth straight month that inflation settled below the central bank’s 2-4% target range.
For the first seven months of the year, inflation averaged 1.7%.
Meanwhile, the Fed has kept its target rate at the 4.25%-4.5% range since December last year.
Markets are now pricing in an 84% chance the Fed would ease rates by a quarter point next month, down from 98% last week, after a raft of data including a jump in US wholesale prices last month and a solid increase in July’s retail sales figures dimmed the prospect of an oversized 50-bp cut, Reuters reported.
Key for markets this week will be the Kansas City Federal Reserve’s Aug. 21-23 Jackson Hole symposium, where Fed Chair Jerome H. Powell is due to speak on the economic outlook and the central bank’s policy framework.
The government fully awarded the T-bills amid strong demand, Mr. Ricafort added, with market liquidity normalizing following the closure of the BTr’s public offering of five-year retail Treasury bonds (RTB).
“Total bids for the Treasury bills again increased after the Bureau of the Treasury already raised a total of P507.2 billion as the RTB offering period ended on Aug. 15.”
The trader said demand for the T-bill offering was “noticeably higher,” noting that this could be “due to investors parking at lower yields due to the relatively flat yield curve recently.”
The BTr is looking to raise P185 billion from the domestic market this month, or P125 billion through T-bills and P60 billion via Treasury bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — Aaron Michael C. Sy with Reuters
