T-bill rates fall across the board on dovish BSP

Yields on short-term local government debt decreased on the auction of Treasury bills on May 13. Image from the Bureau of the Treasury

MANILA, Philippines — Yields on short-term local government debt fell on Tuesday’s sale of Treasury bills (T-bills).  This happened as the Bangko Sentral ng Pilipinas (BSP) struck a more dovish tone. The BSP did so following the slower-than-expected economic growth in the first quarter.

Auction results showed the Bureau of the Treasury (BTr) was able to borrow P25 billion via T-bills, as planned.

The offering was met with strong demand, attracting P70.3 billion in total bids. This exceeded the original size of the issuance by 2.8 times.

But apart from the robust investor appetite, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the recent dovish signal from the BSP also helped bring down borrowing costs for the government.

BSP Governor Eli Remolona Jr. earlier told Bloomberg that additional rate cuts amounting to 75 basis points were “on the table” this year. 

Meanwhile, analysts believed that the benign inflation print in April and below-consensus economic growth of 5.4 percent in the first quarter boosted the case for more monetary easing.

“The latest Treasury bill average auction yields were mostly slightly lower, after the more dovish signals by local monetary authorities recently on possible larger additional BSP rate cuts for the rest of 2025,” Ricafort said.

T-bills cost less for the government

The BTr said the 91-day debt paper fetched an average rate of 5.546 percent. This was lower than the 5.573 percent seen in the previous auction.

The average yield for the 182-day T-bill also fell to 5.65 percent from 5.667 percent before.

Lastly, local creditors asked for an average yield of 5.655 percent for the 364-day debt securities. This costs less for the government than the 5.697 percent seen last week.

For this year, the Marcos administration is targeting to borrow P2.55 trillion from creditors at home and abroad. Borrowings are intended to bridge a projected budget gap of P1.54 trillion. This estimate is equivalent to 5.3 percent of the country’s gross domestic product.

By sources of financing, the government will borrow P507.41 billion from foreign investors in 2025. 

The remaining P2.04 trillion is targeted to be raised domestically. Of this, P60 billion will be via T-bills and P1.98 trillion via longer-dated Treasury bonds.