Gov’t makes full award of T-bill offering at slightly higher rates

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it auctioned off on Monday even as rates inched up amid improved economic prospects as coronavirus disease 2019 (COVID-19) cases drop.

The Bureau of the Treasury (BTr) raised P15 billion as planned via the T-bills it offered on Monday as total tenders reached P42.52 billion, almost triple the initial offer and higher than the P41.78 billion in bids logged in the previous auction.

Broken down, the BTr raised P5 billion as planned via the 91-day debt papers from P14.53 billion in bids. The three-month T-bills fetched an average rate of 1.143%, up by 1.3 basis points (bps) from the 1.13% seen at last week’s offering.

The BTr also borrowed P5 billion as programmed from the 182-day securities it offered on Monday as tenders reached P15.26 billion. The average yield of the six-month debt paper rose 0.6 bp to 1.401% from 1.395% fetched last week.

Lastly, the government made a full P5-billion award of the 364-day T-bills as the tenor attracted bids worth P12.73 billion. The average rate of the one-year instrument stood at 1.616%, up by 0.3 bp from the 1.613% a week ago.

At the secondary market prior to the auction, the 91- 182- and 364-day T-bills were quoted at 1.2164%, 1.4427% and 1.655%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon said in a Viber message to reporters after the auction that the BTr did not see a significant rise in rates after inflation decelerated.

She added that there was no market tantrum after the US Federal Reserve’s taper announcement last week.

Headline inflation in October settled at 4.6%, slower than the 4.9% median estimate of 21 analysts in a BusinessWorld poll.

The October figure was slower than the 4.8% in September, but faster than 2.5% a year earlier. Still, this was the third straight month inflation exceeded the 2-4% target of the Bangko Sentral ng Pilipinas (BSP) for the year. Inflation has topped the BSP target this year except in July.

This brought headline inflation for the first 10 months to 4.5%, faster than the 4.4% forecast by the central bank for the year.

Meanwhile, the Fed last week announced the start of the reduction of its $120-billion monthly asset purchases at $15 billion per month.

Fed Chairman Jerome H. Powell added they could stay patient and keep rates low to support the economy as the job market remains weak.

On the other hand, a bond trader said demand for T-bills remained strong but waned compared with tenders seen in the last few months.

“The rise in short term yields may be attributed to better economic prospects as more industries reopen given the drop in COVID-19 cases onshore,” the trader said in a Viber message.

“So with the economic reopening, some of the excess liquidity in the system that were placed in the short end of the curve during the lockdown may have been deployed to riskier or higher yielding assets…with the continued threat of an elevated inflation backdrop,” the trader added.

The Department of Health on Sunday reported 2,605 new COVID-19 infections. Daily cases could fall below 1,000 by the end of the month, OCTA research said.

On Tuesday, the BTr will offer P35 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and eight months.

The Treasury plans to raise P200 billion from the domestic market in November: P60 billion via weekly T-bill auctions and P140 billion from weekly offers of T-bonds.

The government wants to borrow P3 trillion from local and external sources this year to help fund a budget deficit seen to hit 9.3% of gross domestic product. — Jenina P. Ibanez