The Bureau of the Treasury (BTr) fully awarded the programmed amount of P25 billion of treasury bills at Tuesday’s auction amid healthy demand for the short-term IOUs, sending rates down across all tenors.
The auction was 2.8 times oversubscribed, with total bids reaching P70.3 billion.
The 91-, 182-, and 364-day securities fetched average rates of 5.546 percent, 5.65 percent, and 5.655 percent, all lower than the previous week’s figures of 5.573 percent, 5.667 percent, and 5.697 percent, respectively.
The Bloomberg Valuation Service rates are 5.523 percent for the three-month tenor, 5.671 percent for the six-month tenor and 5.715 percent for the one-year tenor.
“The decline in T-bill rates and strong investor appetite in the latest auction reflect improved liquidity conditions in the domestic market and growing expectations of monetary policy easing by the Bangko Sentral ng Pilipinas (BSP) in the coming months,” John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.
“With inflation easing and the BSP adopting a more dovish stance, investors are shifting more aggressively into short-term government securities,” he added.
Rivera said the absence of immediate external shocks and the BSP’s signal that it may start reducing policy rates also make short-term IOUs more attractive as a low-risk, relatively stable
investment.
Reinielle Matt Erece, economist at Oikonomia Advisory & Research Inc., said the drop in yields impacts both rate cuts and uncertainty on future interest rates.
“As the country grows slower than anticipated, recent rate cuts and anticipation of further monetary policy easing may be expected. This brings overall interest rates down,” Erece said.
“Investors would want to lock in profits before interest rates drop further. In addition, future trends and the economic environment have become harder to forecast. This may have also contributed to the increased demand for short-term securities,” he added.
Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said the average auction yields slightly eased after the generally peaceful election results.
“Lower political risk = lower risk premium = lower Treasury bill yields. All points to lower borrowing costs for the government,” Ricafort said.
“Demand for the short-term IOUs comes from local and foreign investors who would like to lock in still relatively higher interest rates/yields before further BSP and Fed rate cuts in the coming months,” he added.
