Investor demand for the government’s short-term debt papers stayed strong for the second week amid the central bank’s surprise interest rate pause and growing interest in long-term securities amid falling US Treasury yields.

At Monday’s auction on Feb. 17, the Bureau of the Treasury (BTr) fully awarded its P22 billion Treasury bill offer.

Total bids reached P56.3 billion, which were more than two times the amount offered. This week’s total bids increased slightly from the relatively lower demand—P50.11 billion seen in the previous T-bill auction on Feb. 10.

The government fully awarded the P7 billion offering for the 91-day T-bills. Total tenders reached P16.1 billion. The average rate was 5.318 percent, 1.9 basis points (bps) lower than the previous week’s 5.128 percent rate.

For the 182-day debt papers, the Treasury raised P7 billion, fully awarding the offered amount. Bids reached P17.5 billion. The average rate increased by 10 bps to 5.662 percent, from 5.562 percent.

The Treasury borrowed the planned P8 billion through 364-day debt papers. Demand reached P22.7 billion. The average rate slightly decreased by 5.4 bps to 5.78 percent, from 5.726 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 5.158 percent, 5.564 percent, and 5.743 percent, respectively.

Notably, all short-term government securities were higher than this official benchmark. This came despite the slight increase in short-term PHP BVAL yields from the previous week.

According to Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), the average interest rates for T-bills in auctions went up slightly for the second week in a row after it had decreased for five consecutive weeks.

This followed a surprise decision by the Bangko Sentral ng Pilipinas (BSP) to keep its key interest rate unchanged.

Ricafort noted that most T-bill yields remain below the central bank’s key policy rate of 5.75 percent, except for the 364-day T-bill, which is slightly above at 5.78 percent.

“Treasury bill average auction yields also corrected slightly higher after some increased market demand/interest for long-term local government securities (as alternative investment to short-term local government securities) which mostly corrected lower recently after lower US Treasury yields recently,” Ricafort explained.

The Philippines borrows more locally—through treasury bills and bonds—than from foreign sources.

This borrowing strategy takes advantage of domestic banks and creditors who are awash in cash, while veering away from foreign exchange risks and volatility.