T-bill rates fall below 2% after surprise BSP rate cut

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 investors flocking to the auction of government securities.

The Bureau of the Treasury awarded P7 billion in the benchmark 91-day 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. The P14 billion in 364-day IOUs fetched an annual rate of 1.98 percent, down from 2.408 percent.

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

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

As such, the total of P26 billion in bills raised during Monday’s auction exceeded the P20-billion original offering.

Across the three tenors, tenders totaled P131.4 billion, making the auction more than 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 the government did not want to crowd out the private sector for their fundraising.

De Leon said the Treasury opened its tap facility window to sell another P10 billion in 364-day bills to the 11 government securities eligible dealers. —Ben O. de Vera INQ