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 rates as strong US jobs data could support the US Federal Reserve’s hawkish policy stance.

The Bureau of the Treasury (BTr) raised just PHP 12.518 billion via the T-bills it auctioned off on Monday, short of the P15-billion program, even as total bids reached PHP 22.564 billion, above the amount on offer.

Broken down, the Treasury borrowed only PHP 4.788 billion via the 91-day T-bills even as tenders for the tenor reached PHP 6.898 billion, above the PHP 5-billion plan. The three-month paper was quoted at an average rate of 5.806%, 10.8 basis points (bps) above the 5.698% seen for a full award last week. Accepted rates ranged from 5.74% to 5.875%

The government raised just PHP 4.41 billion from the 182-day securities, short of the PHP 5-billion program, despite bids for the tenor reaching PHP 7.646 billion. The average rate for the six-month T-bill was at 6.115%, up by 9.2 bps from 6.023% quoted for last week’s full award, with accepted rates at 6% to 6.175%.

Lastly, the BTr awarded PHP 3.32 billion in 364-day debt papers, below the PHP 5-billion plan, despite demand for the tenor reaching PHP 8.02 billion. The average rate of the one-year T-bill rose by 9 bps to 6.305% from the 6.215% quoted for last week’s partial award. Accepted yields were from 6.275% to 6.325%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.7119%, 6.0106%, and 6.2438%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“The higher T-bill rates today reflected the movement from the stronger-than-expected US nonfarm payrolls report last Friday,” a trader said in an e-mail on Monday.

US Treasury yields rose after the data release as a strong economy may support the Fed’s “higher for longer” stance, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A blowout US jobs report on Friday sparked a delayed rally on Wall Street as the data revealed a strong economy with moderating inflation that helped set aside fears of higher interest rates that caused bond yields to soar, Reuters reported.

September’s job numbers were almost double the 170,000 forecast of economists polled by Reuters and shocked a market trying to understand how the US Federal Reserve will address a strong economy and its mission to lower rates to its 2% target.

Nonfarm payrolls increased by 336,000 jobs last month, the Labor department said, while data for August was revised higher to show 227,000 jobs were added instead of the previously reported 187,000.

The yield on the benchmark 10-year Treasury note jumped more than 13 basis points within a half hour after the report’s release to a fresh 16-year high of 4.8874%, adding to this month’s steep sell-off.

Bond yields later eased a bit from early highs and the three major US stock indexes rallied as stock investors saw moderating wage growth as decelerating inflation further.

Futures traders raised the probability of the Fed hiking rates in November to 29.2%, up from 23.7% before the data’s release, according to CME Group’s FedWatch Tool.

The Fed kept its key rate unchanged at the 5.25% to 5.5% range at its Sept. 19-20 meeting.

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 hold its next policy review on Oct. 31 to Nov. 1.

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

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. — AMCS with Reuters