Gov’t fully awards T-bill offering

Thee government made a full award of the Treasury bills (T-bills) it offered on Tuesday as rates were lower than secondary market yields amid strong demand and policy easing signals from the Finance chief.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned from the T-bills it offered on Tuesday as total bids reached PHP 40.282 billion or almost thrice the amount on the auction block.

Broken down, the BTr borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 17.18 billion. The three-month paper was quoted at an average rate of 5.666%, 0.01 basis point (bp) lower than the 5.667% seen last week. Accepted rates ranged from 5.645% to 5.674%.

The government likewise made a full PHP 5-billion award of the 182-day securities, with bids reaching PHP 12.56 billion. The average rate for the six-month T-bill stood at 5.914%, inching up by 0.6 bp from the 5.908% fetched last week, with accepted rates at 5.898% to 5.925%.

Lastly, the Treasury raised the planned PHP 5 billion via the 364-day debt papers as demand for the tenor totaled PHP 12.465 billion. The average rate of the one-year debt went up by 0.7 bp to 6.046% from the 6.039% quoted last week. Accepted yields were from 6.035% to 6.055%.

The BTr fully awarded its T-bill offer as the rates fetched across all tenors were lower than prevailing secondary market rates, it said in a statement.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.6669%, 5.9694%, and 6.0778%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

T-bill yields were lower than secondary market levels following the slower-than-expected US consumer price index (CPI) and producer price index (PPI) data released last week, a trader said in a phone call.

The US Labor department’s Bureau of Labor Statistics last week said the PPI for final demand decreased 0.2% in May, Reuters reported. That was the biggest drop in the PPI since October and followed an unrevised 0.5% rise in April. Economists had forecast the PPI nudging up 0.1%.

In the 12 months through May, the PPI gained 2.2% after rising 2.3% in April.

The data followed a cooler-than-expected CPI report also released last week. US consumer prices were unchanged in May from April, against market expectations of a 0.1% rise.

The CPI rose at an annual rate of 3.4%, still well above the Fed’s target of 2%.

Meanwhile, T-bill yield movements were mixed week on week following monetary policy signals from Finance Secretary and Monetary Board member Ralph G. Recto, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

The BSP will probably cut its policy rate after the US Federal Reserve, which has signaled it may start easing as late as December, the Finance chief said last week.

Asked if the BSP would begin its easing cycle once the US central bank cuts rates, Mr. Recto said this was “highly probable.”

The BSP has kept its benchmark rate steady at a 17-year high of 6.5% since October 2023 following cumulative hikes worth 450 bps to help bring down inflation.

The Monetary Board’s next policy meeting is on June 27.

The US central bank last week kept its benchmark overnight interest rate in the current 5.25%-5.5% range, where it has been since last July.

On Wednesday, the government will offer PHP 30 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 14 years and seven 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 through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy with Reuters