Gov’t makes full award of T-bill offering at mostly lower rates

The government made a full award of the Treasury bills (T-bills) it offered on Tuesday at mostly lower rates as the Bangko Sentral ng Pilipinas (BSP) is expected to keep borrowing costs steady despite hawkish signals from the US Federal Reserve.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned via the T-bills it auctioned off on Tuesday as total bids reached PHP 49.125 billion or more than thrice the amount on offer.

Broken down, the Treasury made a full PHP 5-billion award of the 91-day T-bills as tenders for the tenor reached PHP 18.625 billion. The three-month paper was quoted at an average rate of 5.573%, 9.8 basis points (bps) below the 5.671% seen last week, with accepted rates ranging from 5.56% to 5.62%.

The government also raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 13.46 billion. The average rate for the six-month T-bill was at 5.993%, inching up by 0.7 bp from the 5.986% seen last week, with accepted rates at 5.95% to 6.038%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt papers as demand stood at PHP 17.04 billion. The average rate of the one-year T-bill went down by 3.7 bp to 6.297% from the 6.334% quoted last week. Accepted yields were from 6.25% to 6.325%.

At the secondary market before Tuesday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.7522%, 5.9993%, and 6.3043%, 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 5.573%, 5.993% and 6.297%, respectively, all lower than the prevailing secondary market rates,” the BTr said in a statement on Tuesday.

“The auction was 3.3 times oversubscribed with total bids reaching PHP 49.1 billion. With its decision, the Committee raised the full program of PHP 15 billion for the auction,” it added.

The T-bills fetched lower rates amid “local views that the BSP will likely continue holding domestic policy rates despite views of more Fed rate hikes,” a trader said in an e-mail.

BSP Governor Eli M. Remolona, Jr. last week said the central bank’s stance remains hawkish, with rate cuts not on its radar, as inflation is still elevated.

The Monetary Board kept benchmark interest rates steady for a third straight meeting this month, but said it is prepared to resume tightening if needed amid risks to inflation.

The BSP this month left its overnight reverse repurchase rate unchanged at a near 16-year high of 6.25%. Interest rates on the overnight deposit and lending facilities were maintained at 5.75% and 6.75%, respectively.

The central bank raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation.

The Monetary Board will hold its next policy meeting on Sept. 21.

Meanwhile, the US central bank may need to hike interest rates further to bring inflation down, Fed Chair Jerome H. Powell said on Friday.

The Fed raised borrowing costs by 25 bps last month, bringing its target interest rate to a range between 5.25% and 5.5%.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

The Federal Open Market Committee will meet on Sept. 19-20 to review policy.

“T-bill auction yields also eased after global crude oil prices [were] still among one-month lows recently,”  Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Brent crude settled six cents lower at USD 84.42 a barrel, after touching a session high of over USD 85 earlier in the day. US West Texas Intermediate crude was 27 cents, or 0.3%, higher at USD 80.10, Reuters reported.

On Friday, crude posted a second week of losses after Mr. Powell said the US central bank may need to raise rates further to cool stubborn inflation.

Tuesday’s T-bill offering was the last for the month. The BTr has raised PHP 53.935 billion out of the PHP 75-billion program for the short-tenored papers.

On Wednesday, the BTr will offer PHP 30 billion in reissued 10-year Treasury bonds with a remaining life of five years and four months.

The Treasury wants to raise PHP 225 billion from the domestic market this month.

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