T-bill rates fell below 2% after surprise, hefty interest rate cut

MANILA, Philippines — Treasury bill rates fell below 2 percent on Monday following the Bangko Sentral ng Pilipinas’ (BSP) surprise and hefty interest rate cut last week that sent a surge of investors interested to buy government securities amid flushing liquidity.

The Bureau of the Treasury awarded P7 billion in the benchmark 91-day T-bills at an average of 1.746 percent, down from 2.068 percent last week.

The Treasury also sold P5 billion in 182-day debt paper at 1.892 percent, down from 2.159 percent previously.

The P14 billion in 364-day IOUs fetched an annual rate of 1.98 percent, down from 2.408 percent during the previous auction.

National Treasurer Rosalia V. de Leon said the rates dived in the aftermath of the BSP’s “unanticipated” 50-basis points reduction in key interest rates last Thursday, which brought the policy rate to a record-low 2.25 percent, amid an uncertain global economic outlook due to the COVID-19 pandemic.

The Treasury doubled the non-competitive bids it accepted for the three-month and one-year government securities to P4 billion and P8 billion, respectively.

As such, the total of P26 billion in T-bills raised during Monday’s auction exceeded the P20-billion original offering.

Across the three tenors, tenders totaled P131.4 billion, making the auction over 6.5 times oversubscribed.

As the financial system remained liquid, de Leon said selling retail treasury bonds (RTBs) was “always an option for us to raise funding, and for small investors to deploy funds in supporting government priorities at this time, particularly in the battle against COVID-19.”

In February, the Treasury issued to small investors a record P310.8 billion in three-year RTBs at a coupon of 4.375 percent.

But de Leon said “we also do not want to crowd out the private sector” for their fund-raising activities, while “stretching maturity [of government securities] as investors search for better yields.”

De Leon said the Treasury opened its tap facility window to sell another P10 billion in 364-day T-bills to the 11 government securities eligible dealers (GSEDs)-market makers.

EDV