T-bill demand, rates rise with dovish central bank outlook

Prospects of easing policy rates of the central bank increased Treasury bills’ rates and demand on Monday, prompting the Bureau of the Treasury (BTr) to upsize the award from P25 billion to P28.4 billion.

BTr auctioned off 91-day, 182-day, and 364-day papers which attracted total tenders amounting to P87.5 billion or 3.5 times larger than its initial offer of P25 billion.

The agency made a full award of the three-month debt papers worth P7 billion. The papers fetched an average rate of 5.526 percent, the same level recorded in the auction on 30 June.

However, the Treasury accepted a higher amount for the six-month papers at P11.9 billion, up from its initial offer of P8.5 billion as bids surged to P33.7 billion. These papers posted an average rate of 5.618 percent, higher than the 5.607 percent in the previous auction.

Full award

Lastly, BTr made a full award of the one-year papers worth P9.5 billion. The debt papers fetched an average rate of 5.656 percent, a slight increase from the 5.651 percent recorded previously.

Rizal Commercial Banking Corporation chief economist Michael Ricafort said investors aimed to maximize gains in the near term as the Bangko Sentral ng Pilipinas (BSP) is expected to further ease its policy rate this year.

“BSP Governor Eli Remolona Jr. signaled possibly more rate cuts toward 50 basis points for the rest of 2025 amid benign inflation. Higher total bids indicated that more investors would like to lock in still relatively higher Treasury bills’ yields,” Ricafort said.

The economist said BSP might also mirror possible rate cuts by the United States’ Federal Reserve (Fed) to ensure the Philippines maintain healthy investment levels and a competitive peso.

Ricafort said financial market analysts project the Fed to ease by 53 basis points (bps), bigger than the 50 bps estimated by Fed officials.

Mixed US economic data

“The outlook came after mostly mixed US economic data and after US President Donald Trump signaled replacing Fed Chairman Jerome Powell. This could increase the odds of future Fed rate cuts in the coming months,” he said.

However, Ricafort added that investors saw some inflationary risks to profits as the peso weakened against the US dollar to P56-per-$1 levels.

“The exchange rate settled among two-month highs after the 12-day Israel-Iran attacks but tempered by the tentative ceasefire announced by Trump on June 24,” he said.

Peso depreciation

On Monday, the peso depreciated to P56.685/$1 from P56.4 last Friday based on data from the Bankers Association of the Philippines.

The Development Budget Coordination Committee (DBCC) expects the average rate to hover between P56 to P58 per US dollar until 2028.

“This is supported by lower domestic inflation and will continue to be shaped by global financial conditions and external trade performance,” DBCC said.

For the third quarter of the year, BTr aims to raise P275 billion as the government vows to maintain infrastructure spending at 5 to 6 percent of the country’s gross domestic product.