The government borrowed more short-term debt than planned as borrowing rates continued to decline for the third straight week, driven by expectations that the central bank will further cut its monetary policy rate in its upcoming April meeting.
At Monday’s auction on March 17, the Bureau of the Treasury (BTr) awarded ₱30.8 billion, more than five times the government’s initial offer of ₱22 billion.
The interest rates on Treasury bills (T-bills) slightly dropped as investors placed more bids on offered short-term debt papers.
Total bids reached ₱118.9 billion, more than four times the amount offered. This week’s total bids more than doubled from the ₱90.5 billion seen in the previous T-bill auction on March 10.
The government awarded ₱9.8 billion for the 91-day T-bill, exceeding the ₱7-billion offering.
Total tenders reached ₱35.4 billion. The average rate was 5.118 percent, six basis points (bps) lower than the previous week’s 5.178 percent rate.
For the 182-day debt papers, the BTr raised ₱9.8 billion, also exceeding the offered amount of ₱7 billion. Bids reached ₱31.5 billion. The average rate declined by 5.2 bps to 5.496 percent, from 5.548 percent.
Likewise, the government borrowed ₱11.2 billion, beyond the planned ₱8 billion, through 364-day debt papers. Demand reached ₱52.1 billion. The average rate also decreased by 7.6 bps to 5.697 percent, from 5.773 percent.
Prior to Monday’s auction, the PHP Bloomberg Valuation (PHP BVAL) Reference Rates showed that the 91-, 182- and 364-day T-bills were quoted at 5.25 percent, 5.568 percent, and 5.792 percent, respectively.
Notably, all short-term government securities were lower than this official benchmark. This is despite the week-on-week decline in most short-term benchmark rates—mostly below the Bangko Sentral ng Pilipinas’ (BSP) current rate, except for the one-year bill.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), noted that T-bill yields declined for the third consecutive week, reflecting dovish signals from BSP Governor Eli M. Remolona Jr. on a possible 25-basis-point (bp) cut in key interest rates on April 10.
Despite this continuous decline, Ricafort said that concerns over political uncertainties and US President Donald Trump’s tariff threats limited further drop.
He noted the strong demand particularly on the one-year T-bill, explaining that investors may have been securing current rates before a possible BSP policy rate cut in the coming months, which could lower returns in the future.
“Global crude oil prices recently lingered to among three-month lows that could help further ease inflationary pressures, support more benign inflation, and help justify possible monetary easing, going forward,” Ricafort said.
Treasury bill yields have mostly dipped for over three weeks following the announcement of a bank reserve requirement cut, set to release ₱330 billion into the financial system by March 28, 2025.
The country’s exit from the global money-laundering watchlist also boosted confidence in the economy and markets.
The US Federal Reserve projects over two rate cuts in 2025, with the first as early as June. This could prompt the BSP to follow suit to maintain favorable interest rate differentials, Ricafort said.
The Philippines prioritizes domestic borrowing through treasury bills and bonds to tap local liquidity and reduce foreign exchange risks. The government has planned an 80:20 borrowing mix—80 percent from domestic creditors and 20 percent from foreign sources.