T-bills partially awarded ahead of CPI

THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday as investors asked for higher yields on expectations of faster November inflation, which could lead to another big rate hike from the central bank next week.

The Bureau of the Treasury (BTr) raised just P7.1 billion from the T-bills it auctioned off on Monday, lower than the P15-billion program, even as bids reached P29.296 billion.

Broken down, the Treasury raised P5 billion as planned via the 91-day T-bills on Monday, with tenders reaching P19.096 billion. The average rate of the tenor went down by 11.6 basis points (bps) to 4.089% from the 4.205% fetched last week, with accepted rates ranging from 4.04% to 4.125%.

Meanwhile, the government awarded just P2.1 billion in 182-day securities even as bids hit P6.21 billion, above the P5-billion program. The six-month paper fetched an average rate of 4.95%, the only rate accepted for the tenor, up by 3 bps from the 4.92% quoted for last week’s award.

Lastly, the BTr fully rejected all bids for the 364-day debt papers, with demand reaching just P3.99 billion, lower than the P5 billion on the auction block. Had the government awarded these bids, the average rate of the one-year paper would have gone up by 62.6 bps to 5.776% from 5.15% last week, with accepted yields ranging from 5.198% to 6.425%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 4.1448%, 4.8476%, and 5.2414%, respectively, based on the PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“Results were mixed in today’s Treasury bill auction as the Auction Committee decided to fully award bids for the 91-day T-bill while partially awarding the 182-day T-bill and rejecting bids for the 364-day T-bill,” the BTr said in a statement on Monday.

“The auction was almost twice oversubscribed, attracting P29.3 billion in total tenders. With its decision, the committee was able to raise P7.1 billion of the P15 billion offering,” it added.

A trader said in a text message that the auction result was “kind of surprising” as there was not enough interest, even with several maturities due this week that will free up liquidity.

“T-bill auction yields were mixed and partially awarded ahead of the latest inflation data,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Philippine Statistics Authority will release November inflation data on Tuesday.

Inflation likely quickened beyond the Bangko Sentral ng Pilipinas’ (BSP) target for an eighth straight month in November, mainly due to costlier food items and higher electricity rates, analysts said.

A BusinessWorld poll of 15 analysts last week yielded a median estimate of 7.8% for the consumer price index (CPI) in November, faster than the 3.7% print a year earlier and the 7.7% print in October.

If realized, November would mark eight straight months that inflation breached the BSP’s 2-4% annual target, and would be the fastest in 14 years or since the 9.1% print in November 2008.

“The mixed T-bill auction was also due to recent signals of a local policy rate hike on Dec. 15,” Mr. Ricafort added.

BSP Governor Felipe M. Medalla on Friday said the central bank is likely to hike interest rates anew this month, but the Monetary Board has yet to decide whether to tighten by 25 or 50 bps on Dec. 15 following dovish hints from the US Federal Reserve chief.

Fed Chair Jerome H. Powell last week signaled it was time to slow the pace of upcoming rate increases. The US central bank now widely expected to raise rates by just 50 bps in its last policy meeting for the year to be held on Dec. 13-14 following four straight 75-bp hikes.

The BSP has raised borrowing costs by 300 bps since May, while the Fed has hiked rates by 375 bps since March.

On Tuesday, the BTr will offer P35 billion in reissued 25-year Treasury bonds (T-bonds) with a remaining life of 11 years and 11 months.

The Treasury wants to raise P135 billion from the domestic market in December, or P30 billion through T-bills and P105 billion via T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at P1.65 trillion this year, equivalent to 7.6% of gross domestic product. — Luisa Maria Jacinta C. Jocson