Gov’t partially awards Treasury bill offer

The government made a partial award of the Treasury bills (T-bills) it offered on Monday at mostly higher rates as some market players expect a hike from the Bangko Sentral ng Pilipinas (BSP) this week.

The Bureau of the Treasury (BTr) raised just PHP 12.185 billion via the T-bills it auctioned off on Monday, short of the PHP 15-billion program, even as total bids reached PHP 40.435 billion or more than two times 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 16.307 billion. The three-month paper was quoted at an average rate of 5.704%, 10.6 basis points (bps) above the 5.598% seen last week, with accepted rates ranging from 5.648% to 5.740%.

Meanwhile, the government raised just PHP 3.83 billion from the 182-day securities out of the planned P5 billion despite bids for the tenor reaching P13.36 billion. The average rate for the six-month T-bill was at 5.945%, inching down by 4.5 bps from the 5.99% seen last week, with accepted rates at 5.9% to 6%.

The BTr also borrowed just PHP 3.355 billion via the 364-day debt papers out of the PHP 5-billion program, even as demand reached PHP 10.768 billion. The average rate of the one-year T-bill went up by 3.1 bps to 6.325% from the 6.294% quoted last week. Accepted yields were from 6.3% to 6.35%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.8575%, 6.0551%, and 6.2757%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“Results were mixed in today’s Treasury bills (T-bills) auction as the Auction Committee decided to fully award bids for the 91-day T-bills while partially awarding the 182- and 364-day securities. The 91-day T-bills fetched an average rate of 5.704%. Meanwhile, the 182- and 364-day securities were capped at 5.945% and 6.325%, respectively,” the BTr said in a statement on Monday.

“The auction was 2.7 times oversubscribed, with total tenders reaching PHP 40.4 billion. With its decision, the Committee raised PHP 12.2 billion of the PHP 15-billion total offering,” it added.

T-bill yields mostly rose due to expectations of a rate hike in the BSP’s policy meeting on Thursday to match the US Federal Reserve’s latest move and help stabilize the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The BSP will likely keep its benchmark interest rates steady for a third straight meeting on Thursday amid easing inflation and slowing economic growth.

Some analysts, however, expect the central bank to start cutting rates in the fourth quarter to boost consumer demand following the disappointing second-quarter gross domestic product data.

A BusinessWorld poll last week showed 13 of 15 analysts expect the Monetary Board to extend its pause at its Aug. 17 meeting.

On the other hand, two economists expect the BSP to hike borrowing costs by 25 bps, mirroring the move of the Fed last month. This would bring the key rate to 6.5%.

The Monetary Board kept its key policy rate unchanged at a near 16-year high of 6.25% at its last two meetings after hiking borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation.

For its part, the Fed raised borrowing costs by 25 bps at its July 25-26 meeting, bringing its target interest rate to a range between 5.25% and 5.5%.

The US central bank has now hiked rates by a total of 525 bps since March 2022.

The Fed will hold its next policy meeting on September 19-20.

Meanwhile, the local unit closed at a near nine-month low of PHP 56.315 versus the dollar on Friday, weakening by 9.50 centavos from Thursday’s PHP 56.22 finish, data from the Bankers Association of the Philippines’ website showed.

This was the peso’s worst close since its PHP 56.56-per-dollar finish on November 29, 2022.

Week on week, the peso dropped by 57.50 centavos from its PHP 55.74 close on August 4.

“The higher done rates today reflected the latest uptick in US producer inflation, which is widely viewed as a leading indicator for future consumer inflation,” a trader said in an e-mail on Monday.

The producer price index (PPI) for final demand increased by 0.3% last month, Reuters reported. Data for June was revised lower to show the PPI was unchanged instead of nudging up by the previously reported 0.1%.

In the 12 months through July, the PPI increased 0.8% after gaining 0.2% in June, boosted by a lower base of comparison last year.

On Tuesday, the BTr will offer PHP 30 billion in fresh 10-year Treasury bonds (T-bonds).

The Treasury wants to raise PHP 225 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 150 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 with Reuters