T-bill yields decline further on expected BSP cut

THE GOVERNMENT increased the amount of Treasury bills (T-bills) it awarded on Monday as yields continued to ease ahead of an expected rate cut by the Bangko Sentral ng Pilipinas (BSP) this week.

The Bureau of the Treasury (BTr) raised P37.8 billion via the T-bills it auctioned off, higher than the P27-billion plan as the offer was over five times oversubscribed, with total tenders reaching P142.15 billion. However, this was below the P158.173 billion in bids recorded last week.

Broken down, the government awarded P12.6 billion in 91-day T-bills, above the P9-billion plan, as demand for the tenor reached P49.75 billion. The three-month paper fetched an average rate of 4.35%, down by 14.2 basis points (bps) from 4.492% last week. Bids accepted had yields ranging from 4.332% to 4.363%.

The Treasury also borrowed P12.6 billion via the 182-day debt versus the P9-billion program as tenders hit P55.65 billion. The average rate of the six-month T-bill was at 4.433%, easing by 14.5 bps from 4.578% previously. Tenders awarded carried rates from 4.41% to 4.453%.

Lastly, the BTr raised P12.6 billion from the 364-day securities, more than the P9-billion plan as bids totaled P36.75 billion. The one-year paper’s average yield was at 4.512%, falling by 10.3 bps from 4.615% last week. Accepted bids had rates from 4.496% to 4.56%.

At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 4.5498%, 4.6354%, and 4.6781%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The auction saw very aggressive bids, driving yields to levels below the secondaries. Total tenders reached P142.2 billion or 5.3 times the offered amount, amid expectations of another rate cut in the BSP meeting later in the week and on the backdrop of the announced P1.4-trillion primary expenditure program of the NG (National Government) to support economic growth,” the Treasury said in a statement.

“The overwhelming demand prompted the committee to exercise the doubling of noncompetitive bids acceptance, adding another P10.8 billion to the auction award total.”

The government fully awarded its offering as T-bill rates dropped for a sixth straight week to their lowest in at least three years on strong demand as market players likely wanted to lock in current yield levels as they see the BSP delivering a sixth straight cut on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

All 16 analysts in a BusinessWorld poll conducted last week expect the Monetary Board to deliver a sixth straight 25-bp cut at its first meeting for the year on Thursday (Feb. 19) to bring the policy rate to 4.25%.

The BSP has lowered benchmark borrowing costs by a cumulative 200 bps since its easing cycle began in August 2024.

BSP Governor Eli M. Remolona, Jr. last week said that a rate cut is possible at this week’s review amid weak economic growth, but reiterated that price stability remains their primary mandate and that their easing cycle is nearing its end.

Meanwhile, Finance Secretary Frederick D. Go said last month that the government plans to spend P1.44 trillion this quarter as part of catch-up efforts to support the economy after last year’s growth slowdown.

A bond trader said that the BTr increased its T-bill award via the acceptance of more noncompetitive bids for all tenors as yields continued their downward trend.

However, the trader noted that total demand was slightly lower week on week in anticipation of a jumbo bond issuance later this week.

On Wednesday, the BTr will hold the rate-setting auction for its new 10-year fixed-rate benchmark Treasury bonds (T-bonds), through which it plans to raise at least P30 billion, with the public offer scheduled to end on Friday. The offering also includes an exchange program for holders of bonds maturing over the next year.

The Treasury aims to raise P308 billion from the domestic market this month, or P108 billion via T-bills and up to P200 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy