BTr partially awards T-bills as rates go up

The Bureau of the Treasury (BTr) partially awarded the Treasury bills (T-bills) it auctioned off on Monday at higher rates as investors expect the Philippine central bank to resume its tightening cycle next month.

The government raised just PHP 11.947 billion via the T-bills it auctioned off on Monday, short of the PHP 15-billion program, even as total bids reached PHP 19.371 billion, above the amount on offer.

Broken down, the Treasury borrowed only PHp 3.637 billion via the 91-day T-bills, below the PHP 5-billion offer, even as tenders for the tenor reached PHP 5.137 billion. The three-month paper was quoted at an average rate of 5.99%, 18.4 basis points (bps) higher than the 5.806% seen last week. Accepted rates ranged from 5.85% to 6.10%

The government raised just PHP 3.31 billion from the 182-day securities, short of the PHP 5-billion program, despite bids for the tenor reaching PHP 6.52 billion. The average rate for the six-month T-bill was at 6.207%, up by 9.2 bps from 6.115% quoted for last week, with accepted rates at 6.125% to 6.25%.

Meanwhile, the BTr made a full PHP 5-billion award of the 364-day debt papers as demand for the tenor reached P7.714 billion. The average rate of the one-year T-bill rose by 8.3 bps to 6.388% from the 6.305% quoted for last week’s partial award. Accepted yields were from 6.325% to 6.438%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.8711%, 6.1458%, and 6.3085%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.

T-bill rates rose due to weak demand as market players expect the Bangko Sentral ng Pilipinas (BSP) to raise borrowing costs at their Nov. 16 policy meeting, a trader said via phone call.

The government made a partial award of its T-bill offer as it rejected bids that were too high, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“T-bill auction yields are already unusually higher than the comparable short-term PHP BVAL yields as of Oct. 13,” Mr. Ricafort said.

“Auction yields were higher after the latest signals from local monetary authorities on a possible 25-bp policy rate hike that cannot be ruled out in November 2023,” he added.

The central bank is open to raising its policy rate by 25 bps during their meeting next month after inflation picked up for a second month in a row in September, BSP Governor Eli M. Remolona, Jr. said last week.

Mr. Remolona said he “would not rule out” a 25-bp increase at the Monetary Board’s Nov. 16 meeting, adding there is still room for monetary tightening as the economy remains strong.

The Monetary Board has kept the policy rate at a near 16-year high of 6.25% at its last four meetings. It raised borrowing costs by 425 bps from May 2022 to March 2023 to help bring down inflation.

Headline inflation quickened for a second straight month to 6.1% in September from 5.3% in August. This brought the nine-month inflation average to 6.6%, still higher than the BSP’s 5.8% forecast and 2-4% target for the year.

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

The Treasury wants to raise PHP 150 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 90 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. — AMCS