Gov’t makes full award of T-bills as yields drop on strong demand

The government fully awarded the Treasury bills (T-bills) it auctioned off on Tuesday as yields fell across the board amid easing inflationary worries here and abroad.

The Bureau of the Treasury (BTr) raised PHP 10 billion as planned via the T-bills it offered on Tuesday as total bids reached PHP 72.215 billion, more than seven times the amount on the auction block.

Broken down, the Treasury made a full PHP 3-billion award of the 91-day T-bills, with tenders for the tenor reaching PHP 25.615 billion. The three-month paper was quoted at an average rate of 4.753%, 137 basis points (bps) below the 6.123% seen for the PHP 5-billion award made for the tenor on Nov. 13. Accepted rates ranged from 4.72% to 4.78%.

The government likewise borrowed the programmed PHP 3 billion through the 182-day securities, as bids for the paper reached PHP 22.38 billion. The average rate for the six-month T-bill stood at 5.181%, down by 133.2 bps from the 6.513% quoted for the previous awarding worth PHP 5 billion, with accepted yields ranging from 5.11% to 5.27%.

Lastly, the BTr raised PHP 4 billion as planned via the 364-day debt papers, with bids reaching PHP 24.22 billion. The average rate of the one-year T-bill went down by 83.3 bps to 5.727% from the 6.56% fetched for the PHP 5 billion borrowed two weeks ago. Accepted yields were from 5.59% to 5.75%.

The government did not auction off T-bills last week to make way for its maiden offering of one-year tokenized bonds, from which it raised PHP 15 billion at a coupon rate of 6.5%.

At the secondary market on Tuesday, the 91-, 182-, and 364-day T-bills were quoted at 5.7399, 5.9376%, and 6.2694%, respectively, based on PHP BVAL Reference Rates data published on the Philippine Dealing System’s website.

“The lower rates tendered today reflected easing inflationary concerns locally and globally,” a trader said in an e-mail on Tuesday.

Philippine headline inflation eased to 4.9% in October from 6.1% in September. This brought the 10-month average to 6.4%, still above the Bangko Sentral ng Pilipinas’ 2-4% target and 6% forecast for the year.

Meanwhile, the US consumer price index (CPI) was unchanged in October for the first time in more than a year and followed a 0.4% rise in September. Year on year, the CPI rose by 3.2%, slower than 3.7% the prior month.

T-bill yields were significantly lower than secondary market levels after global oil prices declined to four-month lows recently, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

On Tuesday, US crude eased 0.13% to USD 74.76 per barrel and Brent was back below USD 80, with oil prices swaying between gains and losses ahead of Organization of the Petroleum Exporting Countries’ meeting later this week, Reuters reported.

Slower US inflation fanned dovish expectations for the US Federal Reserve, which caused global yields, including local rates, to go down, Mr. Ricafort added.

Traders hunkered down on bets that the Federal Reserve could start cutting interest rates in the first half of next year, Reuters reported.

Traders are now eyeing US core personal consumption expenditures price index — the Fed’s preferred measure of inflation — this week for more confirmation that inflation in the world’s largest economy is slowing.

The US central bank kept its target rate steady at the 5.25%-5.5% range for a second straight time during its Oct. 31-Nov. 1 meeting.

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

The Federal Open market Committee will next meet on Dec. 12-13 to review their policy stance.

On Wednesday, the BTr will offer PHP 20 billion in reissued seven-year Treasury bonds with a remaining life of five years and 10 months.

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. — AMCS