BTr fully awards last T-bill offer as yields mostly move sideways

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday at mixed rates amid weakening market activity before the yearend and following the US Federal Reserve and Bangko Sentral ng Pilipinas’ (BSP) policy decisions.    

The Bureau of the Treasury (BTr) raised P20 billion as planned via the T-bills it placed on the auction block as the offer was more than four times oversubscribed, with total tenders reaching P87.456 billion. However, this was slightly below the P88.225 billion in bids recorded last week for a P22-billion offering.

The Auction Committee made a full award as the T-bills were quoted at yields that were all lower than secondary market rates, the Treasury said in a statement.

Broken down, the government raised P6 billion as planned from the 91-day T-bills as demand for the tenor reached P30.985 billion. The three-month paper fetched an average rate of 4.731%, down by 2.8 basis points (bps) from 4.759% in the previous auction. Yields accepted were from 4.709 to 4.779%.

The Treasury also made a full P7-billion award of the 182-day debt as bids hit P28.9 billion. The average rate of the six-month T-bill rose by 3 bps to 4.903% from 4.873% last week. Tenders awarded carried yields from 4.848% to 4.943%.

Lastly, the BTr likewise sold the programmed P7 billion in 364-day securities as the tenor attracted bids totaling P27.571 billion. The one-year paper’s average yield was at 4.924%, declining by 3.8 bps from 4.962% the previous week. Accepted rates were from 4.91% to 4.924%.

At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 4.8683%, 4.9989%, and 5.0583%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“Mixed yields and lower offerings were likely due to the approaching yearend, as well as the lack of strong catalysts in the following weeks. As a result, market players have lessened their activity,” a trader said in a text message.

T-bill rates were mostly lower and moved sideways after both the Fed and the BSP cut benchmark borrowing costs last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Fed cut interest rates by a quarter-percentage point on Wednesday in an uncommonly divided vote, but signaled it would likely pause further reductions in borrowing costs as officials look for clearer signals about the direction of the job market and inflation that “remains somewhat elevated,” Reuters reported.

Wednesday’s cut brought the policy rate to a range of 3.5%-3.75%.

The Fed’s projection for a slower easing path contrasts with market expectations for two 0.25% cuts in 2026, which would bring the fed funds rate to about 3%. Policymakers see only one cut next year and one in 2027.

Investors face uncertainty over next year’s monetary policy as inflation trends and labor market strength remain unclear.

Meanwhile, on Thursday, the BSP cut benchmark interest rates by 25 bps for a fifth consecutive meeting to bring the policy rate to a three-year low of 4.5%.

It has now lowered borrowing costs by 200 bps since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. said manageable inflation gives the Philippine central bank room to cut rates further to help support weakening domestic demand as a corruption scandal involving government infrastructure projects has affected both public and private investments.

He said their current easing cycle is nearing its end, but left the door open to one last 25-bp reduction next year amid expectations of a protracted economic slowdown.

Monday’s T-bill auction was the last for the month and for the year. The government raised P102 billion from the domestic market in December, higher than the P99-billion borrowing program for the month as it upsized its award at one T-bill offering.

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. — A.M.C. Sy with Reuters