Strong investor interest drives down short-term yields
Short-term government yields declined further amid strong investor interest, fueled by rising expectations of central bank interest rate cuts and reserve requirement reductions.
At Monday’s auction, Sept 30, the Bureau of the Treasury (BTr) successfully raised P20 billion through T-bills, with total bids reaching P76.345 billion—almost four times the amount offered.
However, the total bids this week were lower than the P93.257 billion recorded in the previous week.
The Treasury awarded the full P6.5 billion for the 91-day T-bills, as total tenders for this maturity reached P24.370 billion.
The three-month T-bills were priced at an average rate of 5.196 percent, which is 18.4 basis points lower than the 5.380 percent from the previous auction last week.
As for the 182-day securities, the government raised P6.5 billion as planned, despite bids for this tenor reaching P26.145 billion.
The average rate for the six-month T-bill fell to 5.005 percent, marking a significant decline of 47.5 basis points from last week's rate of 5.480 percent.
Lastly, the Treasury successfully borrowed the planned P7 billion through the 364-day debt papers, with demand for this maturity reaching P25.830 billion.
Similarly, the average rate for the one-year T-bill declined by 9.6 basis points to 5.487 percent, down from 5.583 percent in the previous auction.
Prior to the Monday’s auction, the PHP Bloomberg Valuation (PHP BVAL) Reference Rates showed that the 91-, 182- and 364-day T-bills were quoted at 5.258 percent, 5.382 percent, and 5.560 percent, respectively.
The six-month securities saw the largest decrease in yields—dropping by 0.475 percentage points to 5.005 percent—is also significantly lower than the six-month PHP BVAL yield of 5.38 percent as of Sept 27, 2024.
In contrast, the interest rates for the 92-day and 364-day T-bills only fell slightly, by less than 0.10 percentage points compared to similar short-term PHP BVAL yields.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said T-bills auction yields are declining alongside short-term PHP BVAL yields, as expectations rise for a 0.50 percentage point cut in local policy rates.
He further said that the expected adjustments in rank reserve requirements (RRR) could inject P400 billion into the banking system, supporting economic growth amid easing inflation trends. (Derco Rosal)