T-bill rates fall further on easing inflation, liquidity boost

Treasury bill rates further fell across the board Monday amid easing inflation and more liquidity in the market, allowing the Bureau of the Treasury to award all P15 billion in short-dated securities it offered.

Even as rates continued to ease, National Treasurer Rosalia V. de Leon told reporters that the Treasury would likely sell a smaller volume of bills and bonds in the third quarter compared with the P315 billion during the second quarter as ample cash remained in government coffers due to underspending at the start of the year under a reenacted budget.

The Treasury sold P4 billion in benchmark 92-day bills at an average rate of 4.555 percent, down 43.7 basis points (bps) from 4.992 percent last week.

It also awarded P5 billion in 183-day IOUs at 4.923 percent, down 47.7 bps from 5.4 percent a week ago.

The P6 billion in 365-day bills fetched an annual rate of 5.069 percent, down 42.9 bps from 5.498 percent previously.

The yields across the three tenors were all below secondary market rates, the Treasury said in a statement.

The Treasury added one day for each of the tenors due to earlier settlement in light of the public holiday on June 12, Wednesday, during which the country celebrates Independence Day.

Tenders totaled P49.6 billion, making the auction more than three times oversubscribed.

De Leon said that while inflation inched up to 3.2 percent year-on-year in May, government securities remained attractive to investors after the Bangko Sentral ng Pilipinas (BSP) assured the public that it was on track to meet its inflation forecast of 2.9 percent for the entire year.

The first tranche of reduction in universal, commercial and rural banks’ reserve requirement ratio (RRR) last May 30, which boosted domestic liquidity, also bolstered demand for treasury bills, she added.

The escalation of trade tensions between the US and China likewise benefited the Philippines in terms of “hot money” inflows as investors poured money in what they regarded as safe havens, according to De Leon.

As such, De Leon said declining rates would be the trend moving forward.

Meanwhile, De Leon said the domestic borrowing program for the third quarter would likely be below P315 billion as “[public] spending was a bit weaker during the first two quarters” even as the government was able to maintain its domestic borrowings and also raised funds offshore.

The Philippines already sold dollar-denominated global bonds, renminbi-denominated panda bonds and euro bonds during the first half of the year.

“Also, the [tax and non-tax revenue] collections are pretty good so we have more than enough cash to be able to finance the sustained higher spending for the next quarter or so,” De Leon added.