Short-term government yields dropped across all maturities due to rising investor demand and anticipation of additional US Federal Reserve rate cuts.
On Monday, Sept. 23, the Bureau of the Treasury (BTr) raised P20 billion through the sale of 91-, 181-, and 364-day IOUs.
Total bids amounted to P93.26 billion, nearly five times the P20 billion target and exceeding last week's bids of P77.889 billion.
The average interest rate for three-month debt papers rose from 5.743 percent last week to 5.380 percent.
The government accepted P6.5 billion in bids for 91-day T-bills, despite investors showing interest in purchasing up to P29.64 billion of the securities.
Moreover, the national government successfully awarded the full amount of P6.5 billion for the six-month T-bill, with total bids reaching P24.66 billion.
In contrast, the interest rate for the six-month T-bills dropped from 5.940 percent the previous week to 5.480 percent.
Similarly, the yield on the one-year T-bill fell to 5.583 percent, from 5.973 percent last week.
The bureau accepted P7 billion in bids, while investor demand was higher, with total tenders reaching P38.957 billion.
Ahead of Monday's auction, the PHP Bloomberg Valuation (BVAL) Reference Rates showed that the 91-day, 182-day, and 364-day T-bills were priced at 5.736 percent, 5.880 percent, and 5.925 percent, respectively, in the secondary market.
The latest auction yields fell notably by 0.36 to 0.46 percentage points, exceeding the smaller decrease in short-term PHP BVAL yields.
According to Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), increased demand for government bonds and T-bills—fueled by extra liquidity—is expected to lower yields as investors seek to lock in rates ahead of anticipated interest rate changes amid easing inflation and recession concerns.
After a 0.50 percent Fed cut last week, local rates may be lowered in the next meeting, with further Fed cuts of 1.00 percent expected in 2024 and 2025, and another 0.50 percent in 2026, Ricafort added.
He also noted that T-bill average auction yields are now about 0.67–0.87 percentage points below the Bangko Sentral ng Pilipinas’ (BSP) key overnight rate of 6.25 percent, indicating expected local rate cuts soon. (Deck Rosal)