Gov’t partially awards Treasury bill offer

THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it auctioned off on Monday at mostly lower rates as headline inflation slowed last month.

The Bureau of the Treasury (BTr) raised just PHP 11.09 billion from the T-bills on Monday, lower than the PHP 15-billion program, even as the offer was thrice oversubscribed, with total bids reaching PHP 45.354 billion,

Broken down, the Treasury borrowed just PHP 3.06 billion via the 91-day T-bills despite tenders for the tenor reaching PHP 10.628 billion, above the PHP 5-billion plan. The average rate of the three-month papers went down by 10.90 basis points (bps) to 5.891% from the 6% seen at last week’s auction, with accepted rates ranging from 5.888% to 5.95%

The government also made a partial PHP 3.03-billion award of the 182-day securities versus the PHP 5-billion program, with demand at PHP 13.14 billion. The six-month paper fetched an average rate of 6.109%, 11.60 bps higher than the 5.993% seen for the last successful award of the tenor on April 24, with accepted rates from 6.073% to 6.155%.

On the other hand, the BTr raised PHP 5 billion as planned from the 364-day debt papers as bids for the tenor stood at PHP 21.946 billion. The average rate of the one-year T-bill went down by 3.60 bps to 6.211% from the 6.247% seen last week. Accepted rates were from 6.19% to 6.245%.

The government made a partial award of the 91-day and 182-day T-bills to keep their rates close to secondary market levels, National Treasurer Rosalia V. de Leon said in a Viber message to reporters after Monday’s auction.

At the secondary market on Monday, the 91-, 182-, and 364-day T-bills were quoted at 5.9526%, 6.0613%, and 6.1943%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

The T-bills fetched mostly lower rates following data showing that inflation eased in April, a trader said in a Viber message.

The trader noted that even as the 182-day paper’s average rate went up from the last successful award on April 24, it was below the lowest bid of 6.128% for the tenor last week, had it been awarded by the Treasury.

“Treasury bill auction yields mostly corrected slightly lower after latest headline inflation was at a new eight-month low,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said likewise in a Viber message.

Headline inflation eased to 6.6% in April, the slowest in eight months or since the 6.3% print in August 2022, the Philippine Statistics Authority reported on Friday.

This was likewise slower than the 7.6% in March and the 7% median estimate in a BusinessWorld poll and was within the Bangko Sentral ng Pilipinas (BSP) 6.3-7.1% forecast range for the month.

For the first four months, inflation averaged at 7.9%, well above the BSP’s 2-4% target and 6% forecast for the year.

Mr. Ricafort added that the lower T-bill rates came on bets of a pause in rate hikes here and in the United States.

BSP Governor Felipe M. Medalla last month said the Monetary Board could consider holding rates steady at their May 18 meeting if inflation eased further in April.

The BSP has raised benchmark interest rates by 425 bps since May 2022 to help bring down elevated inflation, with its policy rate now at a 16-year high of 6.25%.

Meanwhile, US Federal Reserve Chair Jerome H. Powell last week left the door open to a pause in its tightening cycle amid signs of an economic slowdown.

The Fed last week raised borrowing costs by 25 bps to a range between 5% and 5.25%.

Since March 2022, the US central bank has raised rates by a total of 500 bps.

On Tuesday, the BTr will auction off PHP 25 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and four months.

The Treasury wants to raise PHP 175 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 100 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. — By AMCS