THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday amid strong demand and even as rates were higher than market expectations as investors stayed cautious due to the worsening conflict in the Middle East.

The Bureau of the Treasury (BTr) raised P20 billion as planned from the T-bills it auctioned off on Monday as total bids reached P55.069 billion, almost thrice as much as the amount on offer and higher than the P51.735 billion in tenders seen the previous week.

Broken down, the Treasury borrowed P6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P17.61 billion. The three-month paper was quoted at an average rate of 5.463%, 1.9 basis points (bps) higher than the 5.444% recorded last week, with bids ranging from 5.398% to 5.463%.

The government also made a full P6.5-billion award of the 182-day securities, with bids reaching P14.72 billion. The average rate of the six-month T-bill stood at 5.731%, up by 6.3 bps from the 5.668% fetched last week, with accepted bid yields at 5.6% to 5.78%

Lastly, the Treasury raised P7 billion as planned via the 364-day debt papers as demand for the tenor totaled P22.739 billion. The average rate of the one-year debt also went up by 6.3 bps to 5.686% from the 5.623% quoted last week, with accepted rates ranging from 5.65% to 5.7%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.1499%, 5.5836%, and 5.6926%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.

The government fully awarded the T-bills it auctioned off as the offer was oversubscribed, the Treasury said in a statement.

The T-bill rates awarded on Monday were higher than expected, a trader said in a phone interview.

“Players are more cautious given the geopolitical risks with the conflict in the Middle East,” the trader said.

US envoy Amos Hochstein will hold talks with Lebanese officials in Beirut on Monday on conditions for a ceasefire between Israel and Iran-backed Hezbollah, two sources told Reuters, as Israel expanded its air campaign on the group’s assets overnight, Reuters reported.

Israel overnight attacked sites in Beirut, southern Lebanon and the Bekaa valley that it said are used by Hezbollah to finance its operations. Hundreds of families fled homes near the targeted locations ahead of the strikes, with no casualties reported.

Israel has reportedly given the United States a document with its conditions for a diplomatic solution to end the war in Lebanon, Axios reported on Sunday, citing two US officials and two Israeli officials.

T-bill yields continued to correct higher on Monday, tracking the slight increase in short-term BVAL yields last week, ahead of the scheduled cut in banks’ reserve requirement ratios (RRR), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Strong demand for the offer led to the full award despite higher yields across the board, Mr. Ricafort added.

The Bangko Sentral ng Pilipinas (BSP) will reduce the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 250 bps to 7% from 9.5% starting Friday (Oct. 25).

It will also cut the RRR for digital banks by 200 bps to 4%, while the ratio for thrift lenders will be reduced by 100 bps to 1%. Rural and cooperative banks’ RRR will likewise go down by 100 bps to 0%.

BSP Governor Eli M. Remolona, Jr. earlier said they could bring down the RRR for big banks to as low as zero within his term, which ends in 2029.

The BTr is looking to raise P145 billion from the domestic market this month, or P100 billion via T-bills and P45 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product this year. — A.M.C. Sy with Reuters