Gov’t partially awards T-bills as rates rise

The government made a partial award of the Treasury bills (T-bills) it auctioned off on Monday at higher yields on expectations that inflation picked up last month.

The Bureau of the Treasury (BTr) raised just PHP 12.916 billion via the T-bills on Monday, short of the PHP 15-billion program, even as total bids reached PHP 27.574 billion, higher than 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 10.01 billion. The three-month paper was quoted at an average rate of 5.698%, 10.3 basis points (bps) above the 5.595% seen last week. Accepted rates ranged from 5.68% to 5.725%

The government also raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 9.106 billion. The average rate for the six-month T-bill was at 6.023%, up by 5.5 bps from 5.968% seen last week, with accepted rates at 5.975% to 6.054%.

Meanwhile, the BTr borrowed just PHP 2.916 billion via the 364-day debt papers, below the PHP 5-billion plan, despite demand for the tenor reaching PHP 8.458 billion. The average rate of the one-year T-bill rose by 9.6 bps to 6.215% from the 6.119% quoted for a full award last week. Accepted yields were from 6.15% to 6.25%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.7049%, 5.9828%, and 6.1941%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

T-bill yields rose ahead of the release of September inflation data on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The higher awarded T-bill rates today reflected market expectations for a higher inflation rate in September,” a trader added in an e-mail on Monday.

Inflation likely quickened in September due to higher pump prices and electricity rates and the peso’s depreciation against the dollar, analysts said.

A BusinessWorld poll of 17 analysts yielded a median estimate of 5.4% for September inflation, near the low end of the Bangko Sentral ng Pilipinas’ (BSP) 5.3-6.1% forecast for the month.

If realized, September inflation would pick up from the 5.3% print in August but would be lower than 6.9% in the same month in 2022.

September will also be the 18^th straight month that inflation was above the BSP’s 2-4% target for the year.

The government will not auction off Treasury bonds (T-bonds) on Tuesday due to its ongoing public offering of retail dollar bonds (RDBs) set to end on Oct. 6. The RDBs will be issued on Oct. 11.

The Treasury wants to raise PHP 150 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 90 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