THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday at lower rates on strong demand for safe-haven assets amid broad market volatility.
The Bureau of the Treasury (BTr) raised P22 billion as planned from the T-bills it auctioned off as the offering was almost four times oversubscribed, with total bids reaching P80.475 billion. However, this was lower than the P117.84 billion in tenders recorded on Sept. 22.
The Auction Committee made a full award of its offer as all T-bill tenors fetched average rates that were lower than those seen at last week’s auction and prevailing secondary market yields, the BTr said in a statement.
Broken down, the Treasury borrowed P7.5 billion as planned via the 89-day T-bills as total tenders for the tenor reached P21.93 billion. The three-month paper was quoted at an average rate of 4.828%, down by 5.5 basis points (bps) from the 4.883% recorded in the previous auction. Yields accepted were from 4.71% to 4.9%.
The government also raised P7.5 billion as programmed from the 182-day securities as tenders amounted to P31.2 billion. The average rate of the six-month T-bill was at 5.075%, easing 0.6 bp from the 5.081% fetched last week, with accepted rates spanning from 4.94% to 5.117%.
Lastly, the Treasury sold the planned P7 billion in 364-day debt as demand for the tenor totaled P27.345 billion. The average rate of the one-year T-bill dropped by 2.4 bps to 5.171% from 5.195% previously. Bids awarded carried yields from 5.027% to 5.215%.
At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 4.9354%, 5.1635%, and 5.2607%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
“T-bill average auction yields declined after the recent volatility in the stock market partly led to some fund shifts to Treasury bills, other local fixed-income investments, and other safer havens,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Philippine Stock Exchange index fell below the 6,000 line on Monday, closing at a near six-month low of 5,997.60.
“Lower rates are likely due to the bonds being more attractive at the moment, as their yields have gotten higher recently. As for the demand, I presume it is simply following the trend of declining demand for the past three weeks,” a trader said in a text message.
Mr. Ricafort added that T-bills continue to benefit from improved sentiment after JPMorgan Chase & Co. placed the Philippines in the positive watchlist for its emerging market government bond index earlier this month, as this could help attract more foreign investments, increase liquidity, and lowering borrowing costs.
Being part of the positive watchlist is the final review phase for inclusion in the global bank’s Government Bond Index for Emerging Markets (GBI-EM) series. The Philippines would have a weight of about 1% of the GBI-EM Global Diversified Index if included, JPMorgan said.
T-bill yields declined amid expectations of further easing from both the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve, he said, although the magnitude and timing of additional cuts remain uncertain as policymakers monitor emerging economic data.
“The series of BSP rate cuts in recent months and possible BSP and Fed rate cuts in the coming months led more investors to lock in yields before they go down further,” Mr. Ricafort said, also noting that the three-month T-bill’s average awarded yield has been below the BSP’s target reverse repurchase rate of 5% since mid-September.
Last week, BSP Governor Eli M. Remolona, Jr. said they could lower benchmark rates further as early as next month if the economy shows signs of slowing.
The Monetary Board last month slashed borrowing costs by 25 bps for a third straight meeting to bring the policy rate to 5%. This brought cumulative cuts since August 2024 to 150 bps.
Meanwhile, the Fed this month lowered its target rate by 25 bps to the 4%-4.25% range, which was its first cut since December. This brought its total reductions since September 2024 to 125 bps. Its “dot plot” showed projections of two more rate cuts this year.
Mr. Powell said last week that the central bank needed to continue balancing the competing risks of high inflation and a weakening job market in coming interest rate decisions, Reuters reported.
The BTr is looking to raise P180 billion from the domestic market this month, or P110 billion via T-bills and P70 billion through 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
