THE GOVERNMENT hiked the volume of Treasury bills (T-bills) it awarded on Monday as the offer was met with robust demand and all tenors fetched average yields below prevailing secondary market levels, as the market expects below-target November inflation that could cement prospects of another rate cut from the Bangko Sentral ng Pilipinas (BSP) next week.
The Bureau of the Treasury (BTr) raised P25 billion via the T-bills it auctioned off, higher than the P22-billion plan, as the offer was almost four times oversubscribed, with total tenders reaching P85.26 billion. This was also slightly higher than the P84.87 billion in bids recorded last week.
The Auction Committee made a full award as the papers were quoted at yields that were all lower than secondary market rates, the Treasury said in a statement.
Broken down, the government raised P7 billion as planned from the 91-day T-bills as the tenor was met with demand worth P29.815 billion. The three-month paper fetched an average rate of 4.812%, down by 3.7 basis points (bps) from 4.849% in the previous auction. Yields accepted were from 4.770% to 4.844%.
Meanwhile, the Treasury increased its award of 182-day debt to P10.5 billion from the P7.5-billion program as bids reached P29.75 billion. The strong appetite caused 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 went down by 4 bps to 4.93% from 4.97% last week. Tenders awarded carried yields from 4.89% to 4.965%.
Lastly, the BTr sold the programmed P7.5 billion in 364-day securities as bids for the tenor hit P25.695 billion. The one-year T-bill’s average yield was at 5.011%, inching up by 0.8 bp from 5.003% the previous week. Accepted rates were from 4.998% to 5.027%.
At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 4.882%, 5%, and 5.071%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
The government fully awarded its T-bill offer as rates mostly moved sideways and saw “decent” demand, a trader said in a Viber message.
“Treasury bill average auction yields were again mostly slightly lower, as seen for most weeks over the past five months, ahead of the upcoming local inflation data on Dec. 5 that is expected to remain benign and even slightly slower versus 1.7% in October,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
He said this would bolster expectations of another rate cut from the BSP next week, as signaled by monetary authorities recently.
A BusinessWorld poll of 15 analysts yielded a median estimate of 1.6% for November inflation, within the BSP’s 1.1% to 1.9% forecast for the month.
If realized, this would ease from the 1.7% clip in October and the 2.5% seen in November 2024. It would also be the slowest clip in three months or since the 1.5% in August and mark the ninth straight month that inflation fell below the central bank’s 2-4% annual target.
BSP Governor Eli M. Remolona, Jr. has said that another cut is possible at the Monetary Board’s Dec. 11 meeting, with further reductions until next year also on the table as they want to support the economy amid softening growth prospects.
The central bank has lowered benchmark borrowing costs by a total of 175 bps since it began its easing cycle in August 2024, with the policy rate now at an over three-year low of 4.75%.
Mr. Ricafort said that S&P Global Ratings’ move to affirm the Philippines’ investment-grade “BBB+” rating and its positive outlook last week has also provided a boost to market sentiment.
He added that increasing bets on a US Federal Reserve cut this month also helped bring yields down.
Markets widely expect a second straight reduction at the Fed’s Dec. 9-10 meeting, but the policy outlook for next year as the state of the world’s largest economy remains a mixed bag.
On Tuesday, the government will sell P35 billion in dual-tenor Treasury bonds (T-bonds), or P20 billion in reissued seven-year papers with a remaining life of two years and four months, and P15 billion in reissued 10-year debt with a remaining life of nine years and four months. This will be the BTr’s last bond auction this year.
The Treasury wants to raise P101 billion from the domestic market this month, or P66 billion through T-bills and P35 billion via T-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. — Katherine K. Chan
