THE GOVERNMENT made a full award of the Treasury bills (T-bill) it placed on the auction block on Monday as yields plunged across the board amid expectations of interest rate cuts from the local and US central banks.

The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction yesterday, with bids from market participants surging to P53.6 billion, more than thrice the amount the Treasury wanted to borrow.

Broken down, the government borrowed P4 billion as planned via the 92-day tenor yesterday as bids amounted to P7.8 billion. The average rate declined 43.7 basis points (bp) to 4.555% from the 4.992% logged in the previous auction.

The Treasury also made a full award of the 183-day T-bills as it accepted P5 billion as planned out of offers totalling P20.132 billion. The average yield dropped 47.7 bps to 4.923% from last week’s 5.4%.

For the 365-day T-bills, the government borrowed the programmed P6 billion out of the P25.655 billion tendered by banks. Its average yield also slid 42.9 bps to 5.069% from the 5.498% quoted in the previous offering.

Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 4.958%, 5.193% and 5.44% yesterday, respectively.

Following the auction, National Treasurer Rosalia V. De Leon said the result was within expectations.

“The expectation is also the rate cut. I think the (Bangko Sentral ng Pilipinas) Governor (Benjamin E. Diokno) has mentioned it remains to be on the table. Even the Fed (US Federal Reserve), it’s projecting there will be two rate cuts by the Fed,” Ms. De Leon told reporters yesterday.

“In spite of the pickup in terms of inflation at 3.2%, still the BSP pronouncement is that we will still be on track in meeting the inflation target of about 2.9% for this year,” she added.

Mr. Diokno last week brushed off the slight uptick in May inflation to 3.2%, saying the figure cannot be seen as a reversal of the downward trend. He earlier said the central bank has “more room for monetary easing” and vowed more cuts.

Meanwhile, Fed Chair Jerome Powell signalled last week that the central bank was ready to take action should the ongoing trade tensions between the US and other countries as well as the slowdown in global economic growth affect their economy.

Sought for comment, Robinsons Bank Corp. peso trader Kevin S. Palma said strong interest was seen during the T-bills auction as market participants took their cue from the significant drop in debt yields at the secondary market prior the auction.

“The market reacted to low jobs report released on Friday evening and could already be pricing in a possible easing from the US Federal Reserve towards the end of the year,” Mr. Palma said. “This is coupled with bullish growth outlook domestically, thanks to BSP’s recent policy tweaks.”

He added that icing on the cake was the reinvestment demand due to a P14.3-billion T-bill maturity today.

The government plans to borrow P315 billion from the domestic market this quarter, broken down into P195 billion in T-bills and P120 billion through Treasury bonds.

For next quarter, Ms. De Leon said the Treasury’s domestic borrowing will be lower than the April-June program due to the “slow” government spending earlier this year.

“Since spending was a bit weaker during the first two quarters, but at the same time we’ve been able to maintain our borrowing given the auction performance and also the collections are pretty good, we have more than enough cash to be able to finance the sustained higher spending for the next quarter or so,” she said.

Latest state data showed the government posted a fiscal surplus of P86.9 billion in April, 87.6% more than the P46.3-billion surfeit logged in April 2018 and a reversal of the P58.409-billion deficit seen in March due to the delayed passage of the 2019 national budget.

“Since there’s a catch-up plan in terms of the disbursements…we will have to see how spending goes this month, and from there, we’ll have to see whether we would (do) a little bit of softening in terms of (borrowing in) the third quarter,” Ms. De Leon said.

The government is looking to raise P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of the country’s gross domestic product. — K.A.N. Vidal