The government significantly increased its acceptance of short-term loan bids this week, taking in P7.2 billion for each tenor offered, signaling strong investor confidence and a shifting economic landscape.
Demand for these Treasury bills – 91-day, 182-day, and 364-day – surged, exceeding initial targets and reaching a combined P146.8 billion in tenders. This robust appetite drove down average yields across all tenors, marking a continuation of recent downward trends.
The 91-day bills, maturing in three months, saw the most substantial oversubscription, with P55.681 billion in bids against a P9-billion plan. The average rate settled at 4.492%, a notable decrease from the previous week.
Six-month bills (182-day) also experienced strong demand, attracting P56.582 billion in tenders and achieving an average rate of 4.578%. One-year bills (364-day) garnered P45.91 billion in bids, with an average yield of 4.615%.
These declining yields reflect anticipation of further monetary easing by the central bank, fueled by consistently low inflation and concerns about economic growth. Recent inflation data showed a slight increase to 2% in January, but remains significantly lower than the previous year.
Analysts suggest investors are actively seeking to secure current returns, anticipating potential rate cuts at the upcoming central bank policy meeting on February 19th. The central bank has already reduced benchmark borrowing costs by 200 basis points since August.
The increased borrowing comes as the government prepares for a substantial offering of 10-year bonds, aiming to raise at least P30 billion. This offering will be available to primary dealers and holders of maturing government securities.
Traders note that while demand remains strong, bids were slightly lower than the previous week, potentially as investors reposition themselves in anticipation of the larger 10-year bond auction scheduled for February 18th.
The government successfully raised P300 billion through a similar 10-year bond offering last April, targeting institutional investors. This upcoming auction includes a bond exchange option for existing debt holders.
In addition to the 10-year bonds, the government will also offer P30 billion in reissued 10-year Treasury bonds on Tuesday, with a remaining maturity of seven years and six months.
Overall, the government aims to raise P308 billion from the domestic market this month, utilizing both Treasury bills and bonds to finance its budget deficit, which is capped at 5.3% of gross domestic product this year.
