The Philippine government awarded more Treasury bills (T-bills) than planned at Monday's auction even as yields moved in mixed directions, drawing on strong demand for government debt and easing expectations of aggressive tightening by the Bangko Sentral ng Pilipinas (BSP) as growth prospects remain weak.

The Bureau of the Treasury (BTr) raised P54.8 billion from the T-bills — short-dated government IOUs maturing in 91, 182 or 364 days that it auctions to banks and other investors every Monday — above the P46 billion on offer, after total tenders reached P167.016 billion, more than triple the amount auctioned. The bid total was, however, lower than the P184.224 billion in tenders seen last week for the P42 billion on the block.

The larger award came as the government doubled its acceptance of noncompetitive bids for the six-month and one-year tenors, to P12 billion and P5.6 billion, respectively, the Treasury said in a statement. Noncompetitive tenders, which let investors buy without specifying a yield and are awarded at the average rate of accepted competitive bids, gave the Treasury room to channel the outsized demand into a bigger award.

Broken down by tenor, the Treasury borrowed P24 billion as planned via the 91-day T-bills, with bids for the paper reaching P42.7 billion. The three-month tenor fetched an average rate of 5.008%, up 1.3 basis points (bps) from 4.995% last week, and accepted bids carried yields from 4.9% to 5.026%.

For the 182-day debt, the government raised P21 billion, above the P15-billion program, as tenders hit P84.09 billion. The six-month T-bill averaged 5.442%, dropping 10.3 bps from 5.545% previously, with awarded rates ranging from 5.4% to 5.463%.

The BTr sold P9.8 billion in 364-day securities, exceeding the P7-billion program, on demand totaling P40.226 billion. The one-year paper fetched an average rate of 5.613%, down 1.8 bps from 5.723% last week, and accepted yields ranged from 5.595% to 5.633%.

At the secondary market before Monday's auction, the 91-, 182- and 364-day T-bills were quoted at 4.9486%, 5.3385% and 5.7171%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data from the Treasury. Those reference rates are widely used to value peso government securities, whose short-term yields in turn serve as reference points for money-market borrowing costs.

"T-bill auction yields moved in mixed directions as market participants remained divided on whether the BSP will raise policy rates this week," a trader said in an e-mail.

"There was also a significant uptake in the 91-day bills from stronger investor demand to lock in rates before the crucial policy meeting," the trader added.

T-bill yields mostly eased on Monday amid expectations of a "less hawkish" BSP stance after Philippine economic growth slowed further last quarter, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

"Large bids recently could reflect increased demand and peso liquidity in the financial system after less hawkish or less aggressive monetary tightening signals reiterated by BSP Governor Remolona recently," he added.

The BSP steers the cost of money through its policy rate — the overnight reverse repurchase rate — aiming to keep inflation within the government's 2%-4% target while supporting economic growth. Last week, BSP Governor Eli M. Remolona, Jr. said the central bank's inflation fight is still on, as it has yet to see a sustained disinflation trend, with unpredictable shocks requiring vigilance. He noted, however, that weak economic growth in the second quarter means the BSP can be less aggressive in its stance.

Philippine gross domestic product (GDP) growth slowed to a post-pandemic low of 2.3% in the April-to-June period, down from the 5.4% expansion in the same quarter last year and the 2.8% growth in the first quarter. Excluding the pandemic, this was the slowest growth in over 16 years.

First-semester GDP growth averaged 2.6%, below the government's 3.5%-4.5% full-year target.

Since April, the Monetary Board has raised rates by a cumulative 50 bps through two consecutive 25-bp hikes in April and June, bringing the policy rate to 4.75%. Its next review is scheduled for Aug. 27, the decision traders were positioning for at Monday's auction.

On Tuesday, the government is targeting to raise up to P50 billion from a dual-tenor Treasury bond (T-bond) offering: P20-30 billion from reissued seven-year debt with a remaining life of three years and 11 months, and P10-20 billion via reissued 10-year notes with a remaining life of nine years and six months. Unlike discount-based T-bills, T-bonds pay regular coupons and stretch maturities over years, letting the Treasury lock in longer-term funding.

The Treasury plans to raise P330 billion from the domestic market this month, consisting of P200 billion via T-bills and P130 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.659 trillion, or 5.4% of GDP, this year. — Aaron Michael C. Sy