Gov’t fully awards T-bills at lower rates

The government made a full award of the Treasury bills (T-bills) it auctioned off on Monday on expectations that the Bangko Sentral ng Pilipinas (BSP) will keep benchmark borrowing costs steady at its meeting this week.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned via the T-bills as total bids reached PHP 55.665 billion, or more than thrice the amount on offer.

Broken down, the Treasury made a full PHP 5-billion award of the 91-day T-bills as tenders for the tenor reached PHP 16.37 billion. The three-month paper was quoted at an average rate of 5.552%, 2.3 basis points (bps) above the 5.575% seen last week, with accepted rates ranging from 5.53% to 5.568%.

The government also raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 17.792 billion. The average rate for the six-month T-bill was at 5.939%, down by 2.1 bps from 5.96% seen last week, with accepted rates at 5.9% to 5.953%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt papers as demand for the tenor stood at PHP 21.503 billion. The average rate of the one-year T-bill inched down by 11.7 bps to 6.073% from the 6.19% quoted last week. Accepted yields were from 6.04% to 6.08%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.6225%, 5.9641%, and 6.1636%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded bids for T-bills at today’s auction. The 91-, 182-, and 364-day T-bills fetched average rates of 5.552%, 5.939% and 6.073%; respectively, all lower than previous auction results and secondary market rates. The auction was 3.7 times oversubscribed, attracting PHP 55.7 billion in total tenders,” the BTr said in a statement on Monday.

“With its decision, the Committee raised the full program of PHP 15 billion for the auction,” it added.

T-bill yields declined as local monetary authorities said that the Monetary Board (MB) would likely continue its pause at its rate-setting meeting on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The high demand and lower yields were due to high market liquidity and signals from the BSP that there might be no need to hike rates at its next meeting as the acceleration in inflation for August was temporary, a trader likewise said via phone call.

BSP Governor Eli M. Remolona, Jr. told reporters on Thursday that the acceleration in August inflation was caused by supply shocks in food and fuel, which dissipate “fairly quickly.”

“If that’s all there is, if there are no further supply shocks beyond that uptick in August, then it won’t be necessary to hike the policy rate…It won’t justify an easing, (but) it won’t be necessary to raise the policy rate,” he said.

This is in line with the expectations of 14 out of 17 analysts in a BusinessWorld poll conducted last week which see the MB maintaining the policy rate despite the inflation uptick in August.

However, three analysts see the BSP raising borrowing costs by 25 bps at the Sept. 17 meeting to preemptively ward off inflationary pressures. If realized, this would bring the target reverse repurchase (RRP) rate to 6.5%.

The BSP extended its policy pause for a third straight time at its Aug. 17 meeting, keeping the benchmark interest rate at a near 16-year high of 6.25%.

The central bank has raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation.

The MB will next meet on Sept. 21 to review policy.

On Tuesday, the BTr will offer PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 11 months.

The BTr wants to raise PHP 180 billion from the domestic market this month or PHP 60 billion via T-bills and PHP 120 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. — Aaron Michael C. Sy