Government fully awards T-bills

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it auctioned off on Monday as rates fell across all tenors after the Bangko Sentral ng Pilipinas (BSP) lowered its inflation forecast for the year.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned from the T-bills on Monday as the offer was more than four times oversubscribed, with total bids reaching P60.67 billion.

Broken down, the Treasury borrowed PHP 5 billion as planned via the 91-day T-bills, with tenders reaching PHP 14.062 billion. The average rate of the three-month paper went down by 9.70 basis points (bps) to 5.777% from the 5.874% quoted for the tenor last week, with accepted rates ranging from 5.75% to 5.8%.

The government also made a full PHP 5-billion award of the 182-day securities as bids reached PHP 20.08 billion. The six-month tenor was quoted at an average rate of 5.898%, down by 9.30 bps from 5.991% the previous week, with accepted rates from 5.88% to 5.918%.

Lastly, the BTr raised the programmed P5 billion from the 364-day debt papers as demand for the tenor reached PHP 26.528 billion. The average rate of the one-year T-bill fell by 8.30 bps to 5.945% from the 6.028% fetched for the tenor last week. Accepted yields were from 5.928% to 5.95%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.823%, 5.9062%, and 5.9514%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded bids for Treasury bills (T-bills) at today’s auction. The 91-, 182-, and 364-day T-bills fetched average rates of 5.777%, 5.898% and 5.945%, respectively, all lower than the previous auction and the prevailing secondary market rates,”  the BTr said in a statement on Monday.

“The auction was four times oversubscribed, with total bids reaching PHP 60.7 billion. With its decision, the Committee raised the full program of PHP 15 billion for the auction,” it added.

The Treasury made a full award of its T-bill offer as rates went down amid expectations of easing inflation, a trader said in an e-mail.

“The decline in awarded rates from today’s auction is reflective of the recent lowering of local inflationary outlook from the BSP, which stands in line with participants’ expectation of a gradual decline in domestic inflation this year,” the trader said on Monday.

The BSP last week lowered its average inflation forecast for this year to 5.5% from the 6% it gave in March, still well above its 2-4% target for 2023.

Headline inflation slowed to an eight-month low of 6.6% in April. For the first four months, the consumer price index averaged 7.9%.

The central bank also trimmed its 2024 average inflation outlook to 2.8% from 2.9%.

T-bill yields went down “after recent signals of a pause in local policy rate over the near term,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The BSP last week paused its tightening cycle and signaled that borrowing costs could remain unchanged at its next two to three meetings.

The Monetary Board on Thursday kept its policy rate unchanged at 6.25%. Interest rates on the overnight deposit and lending facilities were also maintained at 5.75% and 6.75%, respectively.

This is the first time the BSP left rates untouched after nine meetings. Since it began its aggressive monetary tightening cycle in May 2022, the central bank had raised borrowing costs by 425 bps.

BSP Governor Felipe M. Medalla said after the review that they could keep their policy settings steady in the next two to three policy meetings on June 22, Aug. 17, and Sept. 21 if inflation continues to ease as expected.

“T-bill yields also eased anew week on week after US Federal Reserve Chairman Jerome H. Powell signaled a pause on Fed rates for the next rate-setting meeting in June 2023, thereby supporting a continued pause in local policy rates,” Mr. Ricafort added.

Mr. Powell said on Friday it is still unclear if US interest rates will need to rise further, as central bank officials balance uncertainty about the impact of past hikes in borrowing costs and recent bank credit tightening with the fact that inflation is proving hard to control, Reuters reported.

In carefully scripted remarks at a Fed research conference in which Mr. Powell was interviewed by a top US central bank staffer, the Fed chief reiterated that the central bank would now make decisions “meeting by meeting,” but also flagged that after a year of aggressive rate increases, officials “can afford to look at the data and the evolving outlook to make careful assessments.”

The Fed has raised borrowing costs by 500 bps since March 2022, with its target interest rate now at 5-5.25%.

On Tuesday, the BTr will auction off PHP 25 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of six years and 11 months.

The Treasury is looking to raise PHP 175 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 100 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