Gov’t upsizes T-bill award amid strong demand, drop in yields

The government upsized the volume of Treasury bills (T-bills) it awarded on Monday as rates dropped across all tenors following slower-than-expected April inflation and with the market looking ahead to the central bank’s policy meeting on Thursday.

The Bureau of the Treasury (BTr) raised P17 billion from the T-bills it offered on Monday, higher than the P15-billion program, as total bids reached P59.842 billion or nearly four times the amount on the auction block.

Broken down, the BTr borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P21.412 billion. The three-month paper was quoted at an average rate of 5.727%, 5.3 basis points (bps) lower than the 5.78% seen last week. Accepted rates ranged from 5.698% to 5.755%.

The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P19.91 billion. The average rate for the six-month T-bill stood at 5.893%, down by 3.7 bps from the 5.93% fetched last week, with accepted rates at 5.873% to 5.91%.

Lastly, the Treasury raised P7 billion via the 364-day debt papers, higher than the programmed P5 billion, as demand for the tenor totaled P18.519 billion. The average rate of the one-year debt dipped by 1.9 bps to 6.037% from the 6.056% quoted last week. Accepted yields were from 6% to 6.045%.

The BTr made a full award of its T-bill offer as rates were “all lower than previous auction and secondary market benchmark rates,” it said in a statement.

“The auction was almost four times oversubscribed with total bids reaching P59.8 billion, prompting the Committee to double the accepted non-competitive bids for the 364-day securities to P4 billion,” it added.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7818%, 5.9081%, and 6.0751%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The awarded T-bill rates this week reflected the softer-than-expected Philippine inflation rate reported last April,” a trader said in an e-mail.

Headline inflation picked up for a third straight month to 3.8% year on year in April from 3.7% in March, the Philippine Statistics Authority reported last week. Still, this was slower than the 6.6% print in the same month a year a prior.

This was within the Bangko Sentral ng Pilipinas’ (BSP) 3.5-4.3% forecast for the April consumer price index (CPI) and marked the fifth straight month that inflation settled within the central bank’s 2-4% annual target range.

The April CPI was also below the 4.1% median estimate in a BusinessWorld poll of 16 analysts.

For the first four months, headline inflation averaged 3.4%, lower than the BSP’s 3.8% full-year forecast.

The better-than-expected April inflation print could lead to more dovish signals from the Monetary Board at their meeting this Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A BusinessWorld poll conducted last week showed 17 out of 19 analysts expect the BSP to maintain its policy rate at a 17-year high of 6.5% for a fifth straight meeting at its May 16 review.

Meanwhile, one analyst expects the BSP to cut rates by 25 bps, while another sees the central bank raising rates amid persistently elevated inflation.

The central bank raised borrowing costs by a cumulative 450 bps from May 2022 to October 2023.

BSP Governor Eli M. Remolona, Jr. earlier said they would consider starting their easing cycle within the year if inflation could settle firmly at around 3% for several months. However, worsening upside price risks could cause the central bank to delay its rate cuts to early next year.

On Tuesday, the BTr will offer P30 billion in reissued 20-year Treasury bonds with a remaining life of 14 years and eight months.

The Treasury wants to raise P210 billion from the domestic market this month, or P60 billion from T-bills and P150 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product for this year. — Aaron Michael C. Sy