Gov’t fully awards T-bill offer as rates drop across the board

The government made full award of the Treasury bills (T-bills) it offered on Monday at lower rates across the board on expectations of policy easing by the Bangko Sentral ng Pilipinas (BSP) this year and before the US Federal Reserve’s meeting this week.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned from its offering of T-bills on Monday as total bids reached PHP 47.245 billion or more than thrice the amount on the auction block.

Broken down, the Treasury raised PHP 5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 14.21 billion. The three-month paper was quoted at an average rate of 5.744%, 2.8 basis points (bps) lower than the 5.772% seen last week. Accepted rates ranged from 5.68% to 5.8%.

The government likewise made a full PHP 5-billion award of the 182-day securities as bids for the tenor reaching PHP 12.67 billion. The average rate for the six-month T-bill stood at 5.916%, down by 5 bps from the 5.966% fetched last week, with accepted rates at 5.855% to 5.98%.

Lastly, the BTr borrowed PHP 5 billion as planned via the 364-day debt papers as demand totaled PHP 20.365 billion. The average rate of the one-year T-bill went down by 5.4 bps to 6.033% from the 6.087% quoted last week. Accepted yields were from 6.023% to 6.043%.

The Treasury on Monday afternoon allowed tax-exempt government-owned and -controlled corporations to purchase one-year T-bills over the counter at government financial institutions at the same average rate.

At the secondary market on Monday before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7729%, 5.9578%, and 6.0195%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

“The lower awarded T-bill rates reflected market expectations of eventual BSP policy rate cuts this year,” a trader said in an e-mail.

BSP Governor Eli M. Remolona, Jr. earlier said the central bank could consider cutting rates by the second half of the year if inflation is firmly within its 2-4% annual target band.

The Monetary Board raised its benchmark interest rate by 450 bps to a near 17-year high of 6.5% from May 2022 to October 2023 as it sought to bring down elevated inflation. It has since kept its policy settings steady.

Headline inflation accelerated for the first time in five months in February as prices of food, particularly rice, rose faster than expected. The consumer price index quickened to 3.4% last month from 2.8% in January, but was slower than the 8.6% print in the same month a year ago.

For the first two months of 2024, headline inflation averaged 3.1%, lower than the BSP’s 3.6% full-year baseline forecast but within its 2-4% target.

T-bill rates declined from a week ago and were also lower than secondary market levels as the market awaits the Fed’s policy meeting for hints on its future policy path, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The US central bank will hold a policy meeting on March 19-20. Markets widely expect the Fed to keep its target rate unchanged for a fifth straight meeting but to remain hawkish following data released last week showing sticky consumer and producer inflation in the world’s largest economy.

The US central bank raised borrowing costs by a cumulative 525 bps from March 2022 to July 2023 to the current 5.25-5.5% range.

On Tuesday, the BTr will offer PHP 30 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 19 years and 11 months.

The Treasury is looking 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 5.1% of economic output this year. — A.M.C. Sy