Gov’t makes full award of Treasury bills

The government made a full award of the Treasury bills (T-bills) it offered on Monday at mostly lower rates amid expectations of easing inflation and that the US Federal Reserve would keep its policy settings steady for the rest of the year.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned via the T-bills it auctioned off on Monday, with total bids reaching PHP 45.103 billion or more than three times the amount on the auction block.

Broken down, the Treasury made a full PHP 5-billion award of the 90-day T-bills as tenders for the tenor reached PHP 20.867 billion. The three-month paper was quoted at an average rate of 5.224%, 38.7 basis points (bps) lower than the 5.611% seen for the tenor last week, with accepted rates ranging from 5.123% to 5.34%. The 91-day T-bill’s tenor was adjusted as its maturity falls on a holiday.

The government also raised PHP 5 billion as planned from the 182-day securities as bids stood at PHP 13.309 billion. The average rate for the six-month T-bill was at 5.789%, down by 3.4 bps from the 5.823% fetched last week, with accepted rates at 5.46% to 5.83%.

Lastly, the BTr borrowed PHP 5 billion as programmed via the 364-day debt papers as demand reached PHP 10.927 billion. The average rate of the one-year T-bill went up by 2.6 bps to 6.21% from the 6.184% quoted for the tenor last week. Accepted yields were from 6.1% to 6.27%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.6997%, 5.9347%, and 6.1188%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

The BTr made a full award of its T-bill offer at mostly lower yields as headline inflation likely eased in July, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Inflation likely further eased below the 5% level in July, as base effects and lower power rates may have tempered higher food costs and pump prices, analysts said.

A BusinessWorld poll of 17 analysts yielded a median estimate of 4.9% for July headline inflation, which would be slower than the 5.4% print seen in June and the 6.4% in July 2022.

If realized, July would mark the sixth straight month of slowing inflation and the first time that inflation fell below 5% since 4.9% in April 2022.

Still, this would exceed the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target for the 16^th straight month.

The Philippine Statistics Authority will release July consumer price index data on Aug. 4 (Friday).

“The lower yields awarded today reflected the slightly lower-than-expected US PCE (personal consumption expenditures) inflation report last Friday, which confirmed views of no further US rate hikes this year,” a trader said in an e-mail on Monday.

Annual US inflation rose at its slowest pace in more than two years in June, with underlying price pressures receding, a trend that, if sustained, could push the Federal Reserve closer to ending its fastest interest rate hiking cycle since the 1980s, Reuters reported.

The PCE price index increased 0.2% last month after edging up 0.1% in May, the Commerce department said. In the 12 months through June, the PCE price index advanced 3%. That was the smallest annual gain since March 2021 and followed a 3.8% rise in May.

The Fed raised borrowing costs by 25 bps last week after pausing in June, bringing its benchmark overnight rate to a range between 5.25% and 5.5%.

The US central bank has hiked rates by a total of 525 bps since it began its tightening cycle in March last year.

On Tuesday, the BTr will offer PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of four years and seven months.

The BTr wants to raise PHP 225 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 150 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy with Reuters