THE GOVERNMENT made a full award of the Treasury bills (T-bills) it auctioned off on Monday as rates dropped across the board amid dovish signals from the Bangko Sentral ng Pilipinas (BSP) chief.
The Bureau of the Treasury (BTr) raised P25 billion as planned from the T-bills as the offer was almost four times oversubscribed, with total bids reaching P94.926 billion. This was also higher than the P87.28 billion in tenders recorded on Aug. 4.
The Auction Committee fully awarded the T-bills as the average rates fetched for the papers were all lower than those seen at the previous auction and prevailing secondary market yields, the BTr said in a statement.
Broken down, the Treasury borrowed P8 billion as planned via the 91-day T-bills as total tenders for the tenor reached P30.47 billion. The three-month paper was quoted at an average rate of 5.287%, down by 3.1 basis points (bps) from the 5.318% seen in the previous auction. Yields accepted ranged from 5.21% to 5.318%.
The government also raised P8 billion as programmed from the 182-day securities as tenders amounted to P33.45 billion. The average rate of the six-month T-bill was at 5.506%, declining by 2.9 bps from the 5.535% fetched last week, with accepted yields ranging from 5.448% to 5.533%.
Lastly, the Treasury sold the planned P9 billion in 364-day debt as demand for the tenor totaled P31.006 billion. The average rate of the one-year T-bill dropped by 2.5 bps to 5.612% from 5.637% previously. Tenders accepted carried rates ranging from 5.6% to 5.638%.
At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 5.3704%, 5.5575%, and 5.6657%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
“Treasury bill average auction yields were again mostly slightly lower for the sixth straight week after BSP Governor Eli M. Remolona, Jr. again signaled possible two 25-bp rate cuts or a total of 50 bps for the rest of 2025, and also after the local inflation data eased to the slowest in nearly six years or since October 2019, considered benign and could still support the dovish signals recently by local monetary authorities,… the earliest of which would be a possible 25-bp rate cut as early as the next rate-setting meeting on Aug. 28,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“BSP Governor Remolona’s comments today regarding more rate cuts this year may have affected the market’s buying sentiment,” a trader likewise said in a text message. “Bids ranged from 3.45 to 4.18 times the offer size with a tighter spread than last week’s bid-to-cover ratios.”
The Philippine central bank signaled on Monday it may deliver the first of two remaining interest rate cuts this year at its Aug. 28 policy meeting as inflation remained subdued, Reuters reported.
Mr. Remolona said it was “quite likely” the bank would lower its key policy rate later this month, reiterating its easing bias to support growth amid global uncertainties and as inflation continues to slow.
“Things look good,” Mr. Remolona told a forum organized by the Economic Journalists Association of the Philippines, adding that inflation could fall to 2% this year, the bottom of the BSP’s target range.
Cooling prices have underpinned domestic demand, with the economy expanding 5.5% in the second quarter, slightly faster than the 5.4% growth in the previous quarter. Annual inflation eased to 0.9% in July, the lowest since October 2019, bringing the year-to-date average to 1.7%.
Mr. Remolona told Reuters on July 28 the BSP was on track to cut rates two more times in 2025. The key rate now stands at 5.25%, a two-and-a-half-year low. After this month’s meeting, the BSP will have two more policy meetings before yearend.
The Monetary Board has lowered benchmark borrowing costs by a total of 50 bps this year via two consecutive 25-bp cuts in April and June, with the policy rate now at 5.25%. This brought cumulative reductions since August 2024 to 125 bps.
Both Mr. Ricafort and the trader said that the government’s ongoing retail Treasury bond (RTB) offer could have affected the demand seen at Monday’s T-bill auction.
The government raised an initial P210 billion from its offer of five-year RTBs at the rate-setting auction held last week, with tenders reaching P354.175 billion.
The notes are priced at 6% per annum, payable quarterly.
The public offer period will run until Friday while settlement is on Aug. 20.
On Aug. 8, the BTr closed the bond exchange component of the RTB offering and limited the sale of the new retail bonds to individual investors.
National Treasurer Sharon P. Almanza earlier said the government is aiming to raise P300 billion in fresh funds from the RTBs, excluding the volume generated through the bond exchange offer program.
The BTr is looking to raise P185 billion from the domestic market this month, or P125 billion through T-bills and P60 billion via Treasury bonds.
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. Sywith Reuters