Gov’t fully awards T-bills at lower rates

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday as rates went down across all tenors on expectations that the US Federal Reserve would end its tightening cycle soon amid slower inflation.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned via the T-bills it auctioned off on Monday, with total bids reaching PHP 44.748 billion or nearly thrice the amount on the auction block.

Broken down, the Treasury made a full PHP 5-billion award of the 91-day T-bills as tenders for the tenor reached PHP 17.716 billion. The three-month papers were quoted at an average rate of 5.884%, 8.9 basis points (bps) below the 5.973% seen for the tenor last week, with accepted rates ranging from 5.86% to 5.9%.

The government also raised PHP 5 billion as planned from the 182-day securities as bids stood at PHP 14.31 billion. The average rate for the six-month T-bill was at 6.095, lower by 17.1 bps than the 6.266% fetched last week, with accepted rates from 6.09% to 6.11%.

The BTr likewise borrowed PHP 5 billion as programmed via the 364-day debt papers as demand reached PHP 12.732 billion. The average rate of the one-year T-bill went down by 11.3 bps to 6.226% from the 6.339% quoted for the tenor last week. Accepted yields were from 6.098% to 6.3%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.9793%, 6.0911%, and 6.1789%, 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 5.884%, 6.095% and 6.226%, respectively, all lower than previous auction results,” the BTr said in a statement on Monday.

“The auction was nearly 3 times oversubscribed with total bids reaching PHP 44.4 billion. With its decision, the Committee raised the full program of PHP 15 billion for the auction,” it added.

The Treasury fully awarded its T-bill offer as rates dropped across the board amid expectations that the Fed would end its tightening cycle sooner than later amid slowing inflation in the world’s largest economy, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The lower T-bill rates awarded today moved in line with the softer-than-expected US consumer inflation report last week. Market expectations of further rate hikes after this week’s policy meeting have dimmed significantly following the data release,” a trader likewise said in an e-mail on Monday.

US consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation subsided further, but probably not fast enough to dissuade the Fed from resuming raising interest rates this month, Reuters reported.

The consumer price index (CPI) gained 0.2% last month after edging up 0.1% in May.

In the 12 months through June, the CPI advanced 3%. That was the smallest year-on-year increase since March 2021 and followed a 4% rise in May.

Meanwhile, US producer prices barely rose in June and the annual increase in producer inflation was the smallest in nearly three years, further evidence that the economy had entered a period of disinflation even as the labor market remains tight.

The producer price index (PPI) for final demand nudged up 0.1% last month. Data for May was revised to show the PPI falling 0.4% instead of the previously reported 0.3%.

In the 12 months through June, the PPI climbed 0.1%. That was the smallest year-on-year gain since August 2020 and followed a 0.9% increase in May.

The run of softer inflation readings likely will push the Fed closer to ending its fastest monetary policy tightening campaign since the 1980s.

The US central bank is expected to raise interest rates again when it meets on July 25-26 after holding them steady in June.

Before last month’s pause, the Fed had hiked its target interest rates by 500 bps to a range between 5% and 5.25% from March 2022 to May 2023.

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

The BTr wants to raise PHP 180 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 120 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