The Bureau of the Treasury (BTr) awarded P27.6 billion in Monday’s Treasury bills auction, upsizing the programmed P22 billion offer as bids hit four times as much in oversubscription.
The auction fetched total bids of P93.8 billion, prompting the Treasury to accept increased amounts for the three-month and six-month government securities, the BTr said.
Maturities reinvested
Michael Enriquez, Sun Life Investment Management and Trust Corp. President, told Malaya Business Insight these were just the usual maturities being reinvested.
“The additional demand may just come from the excess liquidity from banks. Because of higher demand, this has brought down the rates slightly lower from the previous auction levels,” Enriquez said.
“The market is also anticipating another round of policy rate cut which may happen in the next Monetary Policy meeting in February,” he added.
The auction rates settled lower than the previous auction, with the 91-, 182- and 364-day securities fetching averages of 5.588 percent, 5.638 percent and 5.891 percent, respectively.
The previous rates stood at 5.782 percent for the three-month tenor, 5.911 percent for the six-month tenor and 5.931 percent for the one-year tenor.
Comparatively, the Bloomberg Valuation Service Rates were at 5.751 percent, 5.82 percent and 5.856 percent for the respective securities.
Robust demand, excess funds
Philippine Institute for Development Studies Senior Research Fellow John Paolo Rivera said the upsizing of awarded amounts in the latest Treasury bills auction reflects robust demand for short-term securities, which he said could be attributed to the following: investors favoring shorter-tenor instruments such as the 91-day and 182-day securities due to lower risk exposure and quicker maturity cycle.
“This trend is common when market participants expect potential volatility in interest rates or macroeconomic conditions. Also, the banking sector’s strong liquidity position likely contributed to the increased appetite for short-term instruments,” Rivera said.
“With ample funds available, banks and institutional investors are parking excess liquidity in safer government securities,” he added.
Rivera said the recent reduction in policy rates by the central bank and expectations of rate stabilization or further cuts may have encouraged market participants to lock in yields for short-term securities before rates potentially decline further.
“The demand has also driven auction rates below secondary market levels, reflecting investors’ optimism about short-term returns relative to perceived risks. A flatter or inverted yield curve often steers demand toward shorter-dated instruments,” he said.
Rivera also expects strong demand for short-term securities to likely persist in the near term as investors shun risk in other investment more sensitive to global and domestic economic uncertainty; attractive yields of T-bills relative to alternative short-term investments; and high market liquidity as banks seek safer instruments to manage portfolios.
“However, any unexpected shifts in inflation expectations, liquidity conditions, or BSP policy direction could alter this trend,” Rivera warned.
