Gov’t upsizes T-bills sale, but pays more for shorter tenors

Bangko Sentral ng Pilipinas (Central Bank of the Philippines). REUTERS/Romeo Ranoco/File Photo

The government was able to raise P22.6 billion from Monday’s sale of Treasury bills, exceeding its original offer, as cash-awash market players flocked to government securities to lock in higher yields ahead of possible Bangko Sentral ng Pilipinas (BSP) interest rate cut by August.

But despite prospective BSP rate cuts, accredited government securities dealers demanded higher rates for the shorter tenors, resulting in an uptick in rates for 91-day and 182-day T-bills from last week’s auction.

Data from the Bureau of the Treasury (BTr) showed that the latest T-bills auction attracted P46.7 billion in total tenders, 2.3 times larger than the original offer size of P20 billion.

READ: Recent data adds to Fed confidence on cooling inflation: Powell

The 91-day T-bill rate averaged 5.717 percent, more expensive than 5.698 percent rate at last week’s auction. The yield on the 182-day debt paper averaged 5.978 percent, also higher than 5.968 percent last week.

On the other hand, average rate for the 364-day debt paper eased to 6.072 percent from 6.073 percent at the previous auction.

This was as local monetary authorities reiterated the likelihood of a 25-basis point (bps) rate cut as early as August amid easing inflation, Rizal Commercial Banking Corp. chief economist Michael Ricafort said in a Viber message.

BSP Governor Eli Remolona said earlier that the Monetary Board may cut rates by 25 bps as early as August and another 25 bps before the end of the year — possibly even ahead of any dovish move by the US Federal Reserve.

The local central bank has raised rates by a cumulative 450 bps from May 2022 to October 2023 to bring down inflation.
In the international scene, the softer-than-expected US inflation in June strengthened market expectations of a Fed policy rate cut as early as September.

US inflation went down by 0.1 percent in June, making the first drop since May 2020. In the 12 months through June, the inflation rate stood at 3 percent, the lowest level in three years.