THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Tuesday as yields dropped across the board, driven by strong demand on expectations that the Bangko Sentral ng Pilipinas (BSP) will cut key rates this week.

The Bureau of the Treasury (BTr) raised P25 billion as planned from the T-bills it auctioned off as the offer was more than four times oversubscribed, with total bids reaching P113.02 billion. However, this was slightly lower than the P113.751 billion in tenders recorded on Aug. 18.

It fully awarded its offering as the tenors’ average rates were all lower than previous auction results and prevailing secondary market rates, the BTr said in a statement.

Broken down, the Treasury borrowed P8 billion as planned via the 91-day T-bills as total tenders for the tenor reached P31.89 billion. The three-month paper was quoted at an average rate of 5.195%, down by 3.9 basis points (bps) from the 5.234% seen in the previous auction. Accepted yields ranged from 5.188% to 5.2%.

The government likewise raised the programmed P8 billion from the 182-day securities as tenders amounted to P39.27 billion. The average rate of the six-month T-bill was at 5.398%, dropping by 3.7 bps from the 5.435% fetched last week, with accepted rates ranging from 5.388% to 5.413%.

Lastly, the Treasury sold the planned P9 billion in 364-day debt as demand for the tenor totaled P41.86 billion. The average rate of the one-year T-bill went down by 4.2 bps to 5.522% from 5.564% previously. Tenders accepted carried yields of 5.518% to 5.53%.

At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 5.2578%, 5.483%, and 5.5985%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“Treasury bill average auction yields were again mostly slightly lower for the eighth straight week in view of the widely expected 25-bp BSP rate cut as early as the next rate-setting meeting on Thursday, supported by benign inflation recently,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Strong demand also drove T-bill yields lower, Mr. Ricafort added.

A trader likewise said in a text message that T-bill yields dropped before the anticipated BSP cut this week as investors sought to lock in still-high rates.

“Some market players may have aimed to get ahead,” the trader said, adding that the long weekend may have led to the slight decrease in demand from the previous week’s auction.

All 20 analysts in a BusinessWorld poll expect the BSP’s policy-setting Monetary Board to cut the target reverse repurchase rate by 25 bps to 5% from the current 5.25% at its meeting on Thursday.

This would be the third straight 25-bp reduction since April.

The central bank has so far slashed borrowing costs by a cumulative 125 bps since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. earlier said that a cut is “quite likely” at this week’s meeting, with one more reduction likely for the rest of the year as they expect inflation to remain within target.

After this week’s review, the Monetary Board’s remaining meetings for this year are scheduled for Oct. 9 and Dec. 11.

Inflation sharply eased to a near six-year low of 0.9% in July from 1.4% in June, bringing the seven-month average to 1.7%, a tad higher than the central bank’s 1.6% forecast but below its 2-4% annual target.

Tuesday’s T-bill auction was the last for the month. The government raised P103.5 billion from the short-term papers in August, above the P100-billion plan as it fully awarded its offerings and even upsized its award at one auction.

On Wednesday, the government is looking to borrow a combined P35 billion via a dual-tranche offering of reissued Treasury bonds (T-bonds), or P10 billion from seven-year papers with a remaining life of two years and seven months and P25 billion through 25-year notes with a remaining life of 24 years and five months.

The BTr is looking to raise P160 billion from the domestic market this month, or P100 billion through T-bills and P60 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — A.M.C. Sy

DEBT WATCHER AM Best has affirmed its ratings for Malayan Insurance Co., Inc. but revised the outlooks to “negative” from “stable” due to losses from catastrophes and other events.

AM Best affirmed Malayan Insurance’s financial strength rating (FSR) of B++ (Good), long-term issuer credit rating of “bbb” (Good) and Philippines national scale rating of aa+.PH (Superior), it said in a statement on Aug. 21. However, it downgraded its outlooks for these ratings to negative.

“The credit ratings reflect Malayan’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s ultimate ownership by Pan Malayan Management and Investment Corp.,” it said.

“The revised outlooks to negative from stable reflect continued pressure on Malayan’s operating performance fundamentals, mainly due to underwriting performance volatility driven by catastrophe and large loss events in recent periods,” AM Best added.

The credit rater noted that Malayan Insurance posted underwriting losses during three of the last five years with a five-year average combined ratio of 105.6%.

“In 2024, while total operating earnings remained profitable, the company reported an underwriting loss, driven by elevated catastrophe losses that negatively impacted the company’s core commercial lines. Investment income continues to be the principal contributor to Malayan’s overall earnings, supporting the company’s track record of positive earnings,” it said.

“For the first half of 2025, the company recorded an underwriting loss largely driven by adverse loss reserve development on prior periods.”

AM Best said they expect the nonlife insurer’s underwriting profitability to improve on the back of its ongoing portfolio remediation measures.

Meanwhile, it said Malayan Insurance’s balance sheet remains robust, backed by its risk-adjusted capitalization that it expects to “remain at the strongest level over the medium term.”

“Nonetheless, the company’s risk-adjusted capitalization is viewed to be sensitive to shock events, particularly arising from the occurrence of multiple severe catastrophe events in short succession. Offsetting factors include the company’s high reliance on reinsurance to support the underwriting of large commercial risks and its exposure to counterparties that are non-rated on an international FSR scale,” it said.

“AM Best views Malayan’s investment portfolio to have moderate risk, comprising mainly fixed-income securities and a moderate exposure to equity investments,” it added.

Meanwhile, AM Best’s neutral business profile assessment for the company reflects Malayan Insurance’s position as one of the largest nonlife insurance companies in the Philippines based on gross premiums written. “The company benefits from its affiliation with the Yuchengco Group of Companies, a large conglomerate in the Philippines, in terms of branding and distribution.”

Malayan Insurance recorded P15.07 billion in gross premiums written in 2024, data from the Insurance Commission showed, ranking second among nonlife insurers.

In a separate statement, Malayan Insurance said AM Best’s affirmation of its credit ratings show its financial resilience despite a challenging operating environment.

“While the outlooks have been revised to negative from stable, this adjustment reflects recent factors that are affecting the industry, resulting in underwriting performance volatility. Despite this, Malayan has maintained a track record of positive overall earnings, with investment income serving as a principal contributor to its profitability, ensuring consistent financial performance despite these external pressures,” the nonlife insurer said.

“The recent pressures on underwriting performance are a reflection of the current industry landscape, especially with the increased natural catastrophes affecting the entire sector. However, Malayan remains fully committed to navigating these conditions with resilience and strategic agility,” Malayan Insurance Chief Executive Officer Paolo Y. Abaya said.

The insurer added that it will continue its digital transformation as part of its long-term growth strategy.

Malayan Insurance booked a net income of P340.56 million and assets worth P40.92 billion in 2024. — A.M.C. Sy