Gov’t upsizes T-bill award amid robust demand

The government hiked the volume of Treasury bills (T-bills) it awarded on Monday as rates were below secondary market levels on growing expectations that the Bangko Sentral ng Pilipinas (BSP) will resume its easing cycle next month following slower-than-expected February inflation.

The Bureau of the Treasury (BTr) raised PHP 30.8 billion from the T-bills it auctioned off on Monday, higher than the PHP 22-billion plan, as total bids reached PHP 90.598 billion, more than four times as much as the amount on offer and higher than the PHP 85.474 billion in tenders recorded on Feb. 24.

The strong demand prompted the government to double the accepted noncompetitive bids for the 91- and 182-day securities to P5.6 billion and to P6.4 billion for the 364-day T-bill, the Treasury said in a statement.

Broken down, the Treasury borrowed PHP 9.8 billion via the 91-day T-bills, higher than the PHP 7-billion plan, as tenders for the tenor reached PHP 35.628 billion. The three-month paper was quoted at an average rate of 5.178%, declining by 10.5 basis points (bps) from the 5.283% seen at the previous auction, with the BTr only accepting bids with this yield.

The government also made a PHP 9.8-billion award of the 182-day securities, above the programmed PHP 7 billion, as bids stood at PHP 30.05 billion. The average rate of the six-month T-bill was at 5.48%, 13 bps lower than the 5.61% fetched last week, with accepted rates ranging from 5.49% to 5.568%.

Lastly, the Treasury raised PHP 11.2 billion via the 364-day debt papers, more than the PHP 8 billion placed on the auction block, as demand for the tenor totaled PHP 24.92 billion. The average rate of the one-year debt inched up by 0.3 bp to 5.773% from 5.77% previously, with bids accepted carrying yields of 5.755% to 5.779%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.2702%, 5.5681%, and 5.7941%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.

The government upsized its T-bill award on Monday as average rates were all lower than prevailing secondary market yields amid robust demand, the Treasury said.

“The latest Treasury bill average auction yields again slightly corrected lower for the second straight week after slightly rising for three straight weeks after the latest inflation unexpectedly eased to 2.1%, a pleasant surprise near the lower end of the BSP’s inflation target of 2-4%,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This could support a 25-bp cut in borrowing costs as early as next month, he said.

“Demand was strong due to renewed interest in positioning given the recent decline in inflation. Looking forward, there are chances of another rate cut in April,” a trader said in a phone interview.

Philippine headline inflation slowed to 2.1% in February from 2.9% in January, the government reported last week. This was the slowest monthly print in five months or since the 1.9% in September 2024.

This was also below the BSP’s 2.2%-3% forecast for the month and the 2.6% median estimate in a BusinessWorld poll of 18 analysts.

The Monetary Board will next meet to discuss policy on April 3.

Analysts said slower February inflation gives the BSP room to resume its rate-cut cycle at next month’s meeting following its surprise pause at last month’s review.

BSP Governor Eli M. Remolona, Jr. last month said the central bank is still in easing mode, signaling the possibility of up to 50 bps worth of cuts this year.

The Monetary Board has delivered 75 bps in reductions to borrowing costs since it began its easing cycle in August 2024, with the policy rate now at 5.75%.

The trader added that investors swamped the offer as they sought to lock in returns ahead of the upcoming cuts in banks’ reserve requirement ratios (RRR) by month-end, which would free up about PHP 300 billion in liquidity.

Effective March 28, the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions will be cut by 200 bps to 5% from 7%. Digital banks’ ratio will go down by 150 bps to 2.5%, while the ratio for thrift lenders will be lowered by 100 bps to 0%.

Rural and cooperative banks’ reserve ratio has been at 0% since October, which was the last time the BSP cut reserve requirements.

The RRR is the portion of reserves that banks must hold onto to ensure they can meet liabilities in case of sudden withdrawals. A lower ratio means banks have more liquidity, which they can use to fund their loans.

On Tuesday, the BTr will offer PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of seven years and six months.

The Treasury is looking to raise PHP 147 billion from the domestic market this month, or PHP 22 billion from T-bills and PHP 125 billion from T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy