Gov’t hikes T-bill award as rates go down

The government upsized the volume of Treasury bills (T-bills) it awarded on Monday as the papers fetched strong demand and mostly lower rates after the Bangko Sentral ng Pilipinas (BSP) began its easing cycle last week.

The Bureau of the Treasury (BTr) raised PHP 22.6 billion from the T-bills it auctioned off on Monday, higher than the planned PHP 20 billion, as total bids reached PHP 61.297 billion or more than thrice the amount on offer. This was higher than the PHP 52.535 billion in tenders recorded at the Aug. 12 T-bill auction.

Broken down, the BTr borrowed PHP 6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 15.003 billion. The three-month papers were quoted at an average rate of 5.94%, 4 basis points (bps) higher than the 5.9% recorded last week. Accepted rates ranged from 5.875% to 5.975%.

Meanwhile, the government upsized the award for the 182-day securities to PHP 9.1 billion versus the PHP 6.5-billion plan as bids reached PHP 21.874 billion. The average rate for the six-month T-bill stood at 5.989%, down by 10.4 bps from the 6.093% fetched last week, with accepted rates at 5.95% to 6.035%.

Lastly, the Treasury raised PHP 7 billion as planned via the 364-day debt papers as demand for the tenor totaled PHP 24.42 billion. The average rate of the one-year debt inched down by 3.9 bps to 6.023% from the 6.062% quoted last week, with accepted rates at 6% to 6.04%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.9503%, 6.1152%, and 6.1489%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

The government increased its T-bill award on Monday as all tenors fetched average yields that were lower than secondary market benchmark rates, the BTr said in a statement on Monday.

“The auction was 3.1 times oversubscribed…, prompting the committee to increase the accepted noncompetitive bids for the 182-day securities,” it added.

“The lower awarded T-bill rates reflected the recent BSP policy rate cut. The increased volume offering can be attributed to increased investor demand for relatively higher-yielding short-term notes amid market expectations of further policy rate reductions in the coming months,” a trader said in an e-mail.

Longer T-bill tenors fetched lower rates week on week, while the three-month paper saw its average yield inch up from the previous award as the market consolidated, a second trader said in a phone interview.

“The market is just correcting itself,” the second trader said.

The Monetary Board on Thursday cut its policy rate for the first time in nearly four years amid an improving inflation and economic outlook, with the BSP chief signaling at least one more reduction before the end of the year.

The BSP slashed its target reverse repurchase rate by 25 bps to 6.25%, as expected by nine out of 16 analysts in a BusinessWorld poll. Rates on its overnight deposit and lending facilities were also lowered to 5.75% and 6.75%, respectively.

This was the first time that the Monetary Board cut rates since November 2020, when it delivered a 25-bp cut amid the coronavirus pandemic.

Prior to last week’s move, the BSP kept its policy rate at an over 17-year high of 6.5% for six straight meetings following cumulative hikes worth 450 bps between May 2022 and October 2023 to rein in inflation.

“With inflation on a target-consistent path, the current macroeconomic outlook supports a calibrated shift to a less restrictive monetary policy stance,” BSP Governor Eli M. Remolona, Jr. said at a briefing.

Mr. Remolona said they could cut rates by another 25 bps before yearend. The Monetary Board’s remaining policy-setting meetings this year are scheduled for Oct. 17 and Dec. 19.

On Tuesday, the BTr will offer PHP 25 billion in 20-year Treasury bonds (T-bonds) with a remaining life of 14 years and five months.

The Treasury wants to raise PHP 220 billion from the domestic market this month, or PHP 80 billion through T-bills and PHP 140 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy