THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded on Monday as yields dropped across the board on expectations that the Bangko Sentral ng Pilipinas (BSP) will resume its rate-cut cycle as early as next month.
The Bureau of the Treasury (BTr) raised P30.8 billion from the T-bills it auctioned off on Monday, higher than the initial P22-billion plan, as total bids reached P118.944 billion, more than five times as much as the amount on offer and higher than the P90.598 billion in tenders recorded on March 10.
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 after the auction.
Broken down, the Treasury borrowed P9.8 billion via the 91-day T-bills, higher than the P7-billion plan, as tenders for the tenor reached P35.384 billion. The three-month paper was quoted at an average rate of 5.118%, declining by six basis points (bps) from the 5.178% seen at the previous auction. Tenders accepted by the BTr carried yields of 5.1% to 5.123%.
The government also made a P9.8-billion award of the 182-day securities, above the programmed P7 billion, as bids stood at P31.05 billion. The average rate of the six-month T-bill was at 5.496%, 5.2 bps lower than the 5.548% fetched last week, with accepted rates ranging from 5.45% to 5.513%.
Lastly, the Treasury raised P11.2 billion via the 364-day debt papers, more than the P8 billion placed on the auction block, as demand for the tenor totaled P52.06 billion. The average rate of the one-year debt decreased by 7.6 bps to 5.697% from 5.773% previously, with bids accepted having yields of 5.693% to 5.713%.
At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.2499%, 5.5675%, and 5.7920%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.
The government hiked its T-bill award as average rates were all lower than yields seen at the previous auction and at the secondary market, the Treasury said.
T-bill rates went down as investors flocked the offer to lock in relatively high yields before the BSP resumes its easing cycle, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Market players are buying government securities in anticipation of an April rate cut from the central bank and with lower reserve requirement ratios (RRR) by month-end, which could flood the financial system with fresh liquidity that could cause debt yields to decline further, a trader said in a text message.
BSP Governor Eli M. Remolona, Jr. last week said a rate cut is “on the table” at the Monetary Board’s policy meeting on April 10.
He said the BSP is still on easing mode and expects to slash benchmark borrowing costs by “a few more times” this year.
The Monetary Board in February unexpectedly paused its rate-cut cycle, which Mr. Remolona said was a “prudent” move amid uncertainty over the trade policies of US President Donald J. Trump and their potential impact on the Philippines.
The BSP chief earlier said that the central bank will likely continue reducing interest rates by 25 bps at a time, with 50 bps in cuts still on the table this year.
Last year, the BSP cut benchmark interest rates by a total of 75 bps via three consecutive 25-bp reductions since it began its easing cycle in August, bringing the policy rate to 5.75%.
Meanwhile, the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions will be reduced by 200 bps to 5% from 7% effective March 28.
The ratio for digital banks will also be trimmed by 150 bps to 2.5%, while that for thrift banks will be cut by 100 bps to 0%.
Rural and cooperative banks’ RRR has been at zero since October last year.
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 P30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of eight years and 10 months.
The Treasury is looking to raise P147 billion from the domestic market this month, or P22 billion via T-bills and P125 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy
