Treasury bill (T-bill) rates posted a sharp decline at the Bureau of the Treasury auctions Monday following a significant cut in deposit reserves as mandated by the Bangko Sentral ng Pilipinas.
The reserve requirement ratio for universal and commercial banks was cut by 250 basis points, while digital banks and thrift institutions received reductions of 200 and 100 basis points, respectively.
Analysts predict this move will inject an estimated P300 billion into the financial system, potentially lowering interest rates by boosting demand for debt securities. The increase in liquidity is expected to drive down borrowing costs, making it more attractive for investors to engage the financial markets.
Monday’s auction witnessed robust demand, with total bids for P20 billion worth of T-bills reaching P93.26 billion—over 4.5 times the amount offered. The strong demand is in anticipation of additional liquidity flooding the market and investor confidence in government debt instruments and overall economic outlook.
Specifically, the yield on the 91-day T-bill fell to 5.380 percent from 5.743 percent last week, the 182-day bill dropped to 5.480 percent from 5.940 percent, and the 364-day bill decreased to 5.583 percent from 5.973 percent. Domestic interest rates have trended lower since the BSP’s overnight rate cut of 25 basis points in August.
The slowdown in inflation, which fell to 3.3 percent, further fueled expectations of continued monetary easing. The BSP is set to hold two more policy meetings this year, on 17 October and 19 December, indicating that additional adjustments to monetary policy may be on the horizon.
