Government partially awards Treasury bills

The government made a partial award of the Treasury bills (T-bills) it offered on Monday as demand dropped from the previous week’s level, causing rates to rise.

The Bureau of the Treasury (BTr) raised PHP 9.685 billion via the T-bills it offered on Monday, short of the PHP 10-billion program, even as total bids reached PHP 34.732 billion or more than three times the amount on the auction block.

Broken down, the Treasury made a PHP 4.2-billion award of the 91-day T-bills, above the PHP 3-billion program, as tenders for the tenor reached PHP 15.512 billion. The three-month paper was quoted at an average rate of 4.996%, 24.3 basis points (bps) above the 4.753% seen last week. Accepted rates ranged from 4.875% to 5.073%.

Meanwhile, the government raised just PHP 2.5 billion through the 182-day securities, short of the planned PHP 3 billion, despite bids for the paper reaching PHP 9.26 billion. The average rate for the six-month T-bill stood at 5.267%, up by 8.6 bps from the 5.181% quoted for a full award last week, with accepted yields ranging from 5.175% to 5.5%.

Lastly, the BTr borrowed PHP 2.985 billion via the 364-day debt papers, below the PHP 4-billion program, even as bids reached PHP 9.96 billion. The average rate of the one-year T-bill slipped by 0.5 bp to 5.732% from 5.727% fetched for last week’s full award. Accepted rates were from 5.5% to 5.988%.

At the secondary market on Monday, the 91-, 182-, and 364-day T-bills were quoted at 5.3645%, 5.6329%, and 5.7766%, respectively, based on PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.

T-bill yields corrected higher on Monday following their plunge last week amid strong demand, with this week’s auction bids also normalizing, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The higher rates for this week reflected investors’ demand for better yields after T-bill rates declined substantially last week,” a trader added in an e-mail.

Last week, total bids for the BTr’s PHP 10-billion offer reached PHP 72.215 billion. The government made a full award of the papers on the auction block, with rates for the 91-, 182-, and 364-day papers last week falling by 137 bps, 133.2 bps, and 83.3 bps, respectively.

T-bill rates rose ahead of the release of November inflation data, Mr. Ricafort added.

A BusinessWorld poll of 15 analysts conducted last week yielded a median estimate of 4.4% for November headline inflation, hitting the midpoint of the Bangko Sentral ng Pilipinas’ (BSP) 4% to 4.8% forecast for the month.

If realized, last month’s consumer price index would be slower than 4.9% in October and 8% seen last year but would mark the 20^th straight month of inflation breaching the BSP’s 2-4% target.

The Philippine Statistics Authority will release the November inflation report on Tuesday.

“The partial award may have to do with the recent debut USD 1-billion Sukuk bonds and P15-billion maiden one-year tokenized Treasury bonds, both of which gave the ability to reject relatively higher bid yields,” Mr. Ricafort said.

Last week, the government raised USD 1 billion from its maiden sale of 5.5-year Sukuk bonds. The notes, which will have a Ijara and Wakala structure with a Commodity Murabaha aspect, were priced at 5.045%.

Meanwhile, the BTr last month raised PHP 15 billion through the country’s first-ever offering of tokenized bonds, with demand reaching PHP 31.426 billion or more than three times the target issue size of PHP 10 billion. The bonds were priced at 6.5%.

On Tuesday, the government will offer PHP 20 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and eight months.

The BTr wants to raise PHP 60 billion from the domestic market this month, or PHP 20 billion via T-bills and PHP 40 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