Investor demand for the government’s short-term debt papers sustained its strength for the second consecutive week, as stable inflation pushed interest rates lower and heightened expectations of potential rate cuts by the Bangko Sentral ng Pilipinas (BSP).
At Monday’s auction on Jan. 13, the Bureau of the Treasury (BTr) successfully raised P27.60 billion through Treasury bills (T-bills), exceeding the government’s total offer of P22 billion.
Total bids reached P93.78 billion—more than four times the amount offered. This week’s total bids surged once again, surpassing the P70.98 billion in the previous T-bills auction on Jan. 6.
The government awarded P9.8 billion for the 91-day T-bills, exceeding the offered amount by P2.8 billion. Total tenders reached P37.86 billion. The average rate was 5.588 percent, 19.4 basis points lower than the previous week.
The Treasury raised P9.8 billion from the 182-day debt papers, exceeding the P7 billion offer by P2.8 billion. Bids reached P31.38 billion. The average rate dropped to 5.638 percent, decreasing by 27.3 basis points.
The Treasury borrowed the planned P8 billion through 364-day debt papers. Demand reached P24.54 billion. The average rate slightly decreased by 4 basis points to 5.891 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 5.751 percent, 5.820 percent, and 5.856 percent, respectively. Notably, all short-term government securities were lower than this official benchmark, continuing the trend seen last week.
According to Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), the country’s short-term yields have dropped slightly for the second week in a row after rising for 11 straight weeks. This downward trend aligns with recent declines in short-term benchmark yields.
Ricafort explained that the easing trend comes as inflation remains low at 2.9 percent in December 2024, comfortably within the central bank’s target range. This stable inflation, Ricafort said, could support future interest rate cuts, especially if the U.S. Federal Reserve continues lowering rates in 2025.
Ricafort noted that most T-bill yields have dropped below the BSP’s key policy rate of 5.75 percent, reflecting growing expectations of a possible rate cut. This could happen as early as the BSP’s next policy meeting on Feb. 20, following recent signals from monetary officials.
BSP Governor Eli M. Remolona Jr. earlier said that the current policy rate remains in restrictive territory, leaving room for potential rate cuts, especially with inflation remaining stable and within target.