THE GOVERNMENT upsized its award of the Treasury bills (T-bills) it offered on Monday as yields dropped across the board on the back of robust investor appetite for short-term debt and expectations of further monetary easing here and in the United States.
The Bureau of the Treasury (BTr) raised P28.4 billion from the T-bills it auctioned off, higher than the P25-billion plan, with the offer more than four times oversubscribed as total bids reached P103.45 billion. This was higher than the P92.163 billion in tenders recorded on July 21.
The Auction Committee hiked the awarded T-bill volume as all tenors fetched average rates that were lower than those quoted at the previous auction as well as prevailing secondary market yields, 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 P37.74 billion. The three-month paper was quoted at an average rate of 5.388%, down by 3.4 basis points (bps) from the 5.422% seen in the previous auction. The BTr only accepted bids with this yield.
Meanwhile, the government raised P11.9 billion from the 182-day securities, higher than the P8.5-billion program, as bids amounted to P36.74 billion. The strong demand prompted the BTr to double its acceptance of non-competitive bids for the tenor to P6.8 billion, it said.
The average rate of the six-month T-bill was at 5.543%, down by 2.3 bps from the 5.566% fetched last week, with accepted yields ranging from 5.54% to 5.55%.
Lastly, the Treasury sold the programmed P9.5 billion in 364-day debt as demand for the tenor totaled P28.97 billion. The average rate of the one-year T-bill inched down by 0.4 bp to 5.627% from 5.631% previously. Tenders accepted carried rates ranging from 5.6% to 5.648%.
At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 5.4104%, 5.5817%, and 5.68%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the Treasury fully awarded its T-bill offering as average yields were lower across the board on bets of another rate cut by the Bangko Sentral ng Pilipinas (BSP) as early as next month.
The Monetary Board in June reduced borrowing costs by 25 bps for a second straight time this year, bringing its policy rate to 5.25%. Since starting its easing cycle in August, the central bank lowered interest rates by a cumulative 125 bps.
BSP Governor Eli M. Remolona, Jr. has signaled two more 25-bp cuts this year. The Monetary Board’s next policy meeting is scheduled for Aug. 28.
Rates also went down “amid uncertainties over US President Donald J. Trump’s tariffs ahead of Aug. 1… as these could slow down the global economy and could support future Federal Reserve rate cuts,” Mr. Ricafort said.
The Fed is widely expected to keep its target rate at the 4.25% to 4.5% range at its meeting this week as officials seek more data to determine tariffs’ impact on inflation before they ease rates further, Reuters reported.
Traders see about a 60% chance of a rate cut in September, according to CME’s FedWatch tool.
A trader likewise said in a text message that investors likely positioned before the Aug. 1 US tariff deadline.
“Very high demand” likely led to the BTr’s full award of its T-bill offer on Monday, the trader said.
“The marginal increase in demand could also have been due to today being close to month-end, so investors may be trying to fulfill their requirements before August… Another thing to note is the tight spread of the awarded yields. The 91-day was only awarded at 5.388%, the 182-day had a spread of 5.54%-5.55%, and the 364-day has the widest awarded spread at 5.6%-5.648%,” the trader added.
Monday’s T-bill auction was the last for the month. The government raised P137.1 billion from short-term securities in July, higher than the P125-billion plan, as the Treasury upsized its awards at four of the five auctions while making a partial award of one offering.
On Tuesday, the government will offer P20 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 18 years and 10 months.
The BTr wants to raise P250 billion from the domestic market this month, or P125 billion through T-bills and P125 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. — Aaron Michael C. Sy with Reuters