THE GOVERNMENT hiked its award of the Treasury bills (T-bills) it offered on Monday as yields dropped across all tenors on expectations of a rate cut by the US Federal Reserve this week, as well as further monetary easing at home.
The Bureau of the Treasury (BTr) raised P25 billion from the T-bills it auctioned off, above the P22-billion plan, as the offer was nearly four times oversubscribed, with total bids reaching P85.365 billion. However, this was lower than the P95.17 billion in tenders recorded on Oct. 20.
The Auction Committee hiked its T-bill award as all tenors fetched average rates that were lower than those quoted at the previous auction and at the secondary market, the BTr said in a statement.
Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as total tenders for the tenor reached P29.555 billion. The three-month paper was quoted at an average rate of 4.858%, dropping by 2.6 basis points (bps) from 4.884% in the previous auction. Yields accepted were from 4.8% to 4.878%.
Meanwhile, the government upsized the award for the 182-day securities to P10.5 billion, above the P7.5-billion plan, as the tenor drew demand amounting to P33.45 billion. This prompted the BTr to double its acceptance of noncompetitive bids for the tenor to P6 billion, it said.
The average rate of the six-month T-bill was at 5.044%, down by 1.4 bps from the 5.058% fetched last week, with accepted rates ranging from 5% to 5.058%.
Lastly, the Treasury sold the programmed P7.5 billion in 364-day debt as tenders for the tenor totaled P22.36 billion. The average rate of the one-year T-bill inched down by 0.4 bp to 5.093% from 5.097% previously. Bids awarded carried yields from 5.02% to 5.128%.
At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 4.9263%, 5.0977%, and 5.1626%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
The government fully awarded its T-bill offer as rates continued to go down, a trader said in an e-mail.
“The sideways downward movement is likely due to the FOMC (Federal Open Market Committee) rate cut this week being extremely likely because of the US CPI (consumer price index) results last week, as well as the light local market data releases for the next few weeks,” the trader said. “Furthermore, the low market activity this morning was another factor as well.”
“T-bill average auction yields were mostly lower ahead of the widely expected 25-bp Fed rate cut on the next rate-setting meeting on Oct. 29, 2025 after dovish signals from most Fed officials recently,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Fed is widely expected to lower its current benchmark interest rate of 4% to 4.25% by another quarter percentage point when it decides on policy on Wednesday, a view supported by tamer-than-estimated inflation data on Friday, Reuters reported.
With that rate move already factored into asset prices, markets are likely to be more sensitive to any forward-looking language from Fed Chair Jerome H. Powell, with the central bank expected to cut rates further at its next meeting in December.
Possibly clouding the Fed’s decision-making ability is the lack of data provided by the government since its shutdown began on Oct. 1, including delays in employment releases at a time of simmering worries about the health of the labor market.
Mr. Ricafort added that expectations of more rate cuts from the Bangko Sentral ng Pilipinas (BSP) also helped pull T-bill yields down.
Monetary Board member Benjamin E. Diokno said in a Bloomberg Television interview on Monday that a fifth straight 25-bp cut is likely in their Dec. 11 meeting, with further reductions also possible until next year, amid the economic fallout from a widening corruption scandal related to government infrastructure projects.
Tuesday’s auction was the last for the month. The government raised P183 billion from the domestic market in October, above the P180-billion plan, as it made full awards at all its T-bill and Treasury bond (T-bond) auctions and hiked its awarded volume on Tuesday.
For November, the BTr is looking to raise P158 billion from the local market, or P88 billion via T-bills and P70 billion through T-bonds.
The government borrows from local and foreign sources to finance its budget deficit, capped at P1.56 trillion or 5.5% of gross domestic product this year. — A.M.C. Sy
