Gov’t hikes T-bill award on strong demand

The government raised the volume of Treasury bills (T-bills) it awarded for a second straight week on Monday at mixed rates as demand continued to climb amid expectations that the Bangko Sentral ng Pilipinas (BSP) will keep borrowing costs higher for longer.

The Bureau of the Treasury (BTr) raised PHP 19 billion via the T-bills it offered on Monday, above the original PHP 15-billion program, as total bids reached PHP 46.875 billion or more than thrice the amount on the auction block.

“The auction was 3.1 times oversubscribed,… prompting the committee to double the accepted volume of non-competitive bids for the 91- and 182-day T-bills,” the BTr said in a statement.

Broken down, the Treasury raised PHP 7 billion from the 91-day T-bills, above the PHP 5-billion program, as tenders for the tenor reached PHP 18.36 billion. The three-month paper was quoted at an average rate of 5.102%, 3.8 basis points (bps) below the 5.14% seen last week. Accepted rates ranged from 4.98% to 5.25%.

The government also raised PHP 7 billion through the 182-day securities, above the planned PHP 5 billion, as bids for the paper reached PHP 16.91 billion. The average rate for the six-month T-bill stood at 5.582%, inching up by 0.4 bp from the 5.578% quoted previously, with accepted yields ranging from 5.29% to 5.7%.

Meanwhile, the BTr borrowed PHP 5 billion as programmed via the 364-day debt papers as bids for the tenor reached PHP 11.605 billion. The average rate of the one-year T-bill went up by 14.4 bps to 5.973% from 5.829% previously. Accepted rates were from 5.83% to 6.025%.

At the secondary market on Monday, the 91-, 182-, and 364-day T-bills were quoted at 5.2265%, 5.5084%, and 5.8274%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

T-bill rates were mixed on Monday as “investors considered prospects that the BSP will keep policy rates unchanged,” a trader said in an e-mail.

The central bank will likely keep benchmark interest rates elevated in the coming months until inflation settles within their 2-4% annual target, BSP Governor Eli M. Remolona, Jr. said last month.

The BSP last month kept its policy rate unchanged at a 16-year high of 6.5% for a second straight meeting.

The central bank raised benchmark interest rates by a cumulative 450 basis points from May 2022 to October 2023 to help bring down elevated inflation.

Headline inflation slowed to 3.9% in December from 4.1% in November and 8.1% in the same month a year ago, the Philippine Statistics Authority reported last week. This marked the first time the consumer price index (CPI) settled within the central bank’s 2-4% target and was the slowest in 22 months or since the 3% reading in February 2022.

However, for 2023, inflation averaged 6%, faster than 5.8% in 2022 and marking the second straight year that the CPI exceeded the BSP’s 2-4% target.

The Monetary Board will hold its first meeting this year on Feb. 15.

Strong US jobs data recently also affected T-bill rates on Monday, the trader added.

The monthly nonfarm payrolls report showed the US economy added 216,000 new jobs in December, Reuters reported.

The jobless rate held steady at 3.7%, down from most forecasters’ expectations for it to rise, prompting concerns that the US Federal Reserve’s long battle to tame inflation may have further to run.

The Federal Open Market Committee will hold its first policy meeting this year on Jan. 30-31.

On Wednesday, the BTr will auction off PHP 30 billion in new five-year Treasury bonds (T-bonds).

The Treasury wants to raise PHP 195 billion from the domestic market this month, or PHP 75 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 gross domestic product this year. — A.M.C. Sy with Reuters