Government fully awards T-bills

The government made a full award of the Treasury bills (T-bills) it offered on Monday at mostly steady rates as the Bangko Sentral ng Pilipinas (BSP) is expected to keep its monetary policy settings steady in the near term.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned from the T-bills it auctioned off on Monday as the offer was more than thrice oversubscribed, with total bids reaching PHP 48.726 billion.

Broken down, the Treasury borrowed PHP 5 billion as planned via the 91-day T-bills, with tenders reaching PHP 13.68 billion. The average rate of the three-month paper inched up by 0.6 basis point (bp) to 5.783% from the 5.777% quoted for the tenor last week, with accepted rates ranging from 5.688% to 5.799%.

The government likewise made a full PHP 5-billion award of the 182-day securities as bids for the tenor reached PHP 16.53 billion. The six-month T-bill was quoted at an average rate of 5.879%, down by 1.9 bps from 5.898% the previous week, with accepted rates from 5.748% to 5.9%.

Lastly, the BTr raised the programmed PHP 5 billion from the 364-day debt papers as demand reached PHP 18.516 billion. The average rate of the one-year T-bill climbed 0.3 bp to 5.948% from the 5.945% fetched for the tenor last week. Accepted yields were from 5.813% to 5.975%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.79%, 5.8632%, and 5.8961%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“The slightly higher rate on the awarded 91-day T-bills are indicative that investors are highly expecting for the BSP to maintain its policy rates in the near term as the central bank noted in its latest meeting,” a trader said in an e-mail.

Meanwhile, the marginal movements in the yields on the longer 182- and 364-day tenors reflect bets of potential cuts in benchmark interest rates later this year or in early 2024, the trader added.

The BSP on May 18 paused its tightening cycle and signaled that borrowing costs could remain unchanged at its next two to three meetings.

The Monetary Board 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.

The central bank has said it expects inflation to return within the 2-4% target by the fourth quarter of the year.

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%.

Meanwhile, the mostly higher auction yields were due to the increase in US Treasury yields recently, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Monday’s T-bill auction was the last offering for May. The Treasury raised P63.005 billion from the T-bills out of the PHP 75-billion program for the month after it made partial awards at two of the five auctions.

On Tuesday, the BTr will auction off PHP 25 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and three months.

The Treasury wants to raise PHP 185 billion from the domestic market in June, or P60 billion via T-bills and PHP 125 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. — By A.M.C. Sy