T-bills partially awarded as rates of long tenors rise

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Bureau of Treasury (BoT)

THE GOVERNMENT partially awarded the Treasury bills (T-bill) it placed on the auction block on Monday, with yields on the longer tenors climbing as investors expect the central bank to hike interest rate following the faster-than-expected June inflation print.

The Bureau of the Treasury borrowed only P13.399 billion during the T-bills auction yesterday, falling short of the P15-billion program.

Total tenders at the auction stood at P29.99 billion, climbing from the P26.5 billion tallied during the previous offering.

Broken down, the Treasury made a full award of the 91-day papers, raising P4 billion as planned. Total offers from banks and other financial institutions totalled P15.8 billion as the average rate dropped 9.6 basis points to 3.308% from the 3.404% logged in the previous auction.

The government also borrowed P5 billion as planned via the 182-day tenor as it was oversubscribed, with total bids amounting to P6.139 billion. The average yield however rose 10.8 basis points to 4.045% from last week’s 3.937%.

However, for the 364-day T-bills, the BTr borrowed just P4.399 billion out of the P6 billion it wanted to raise. The average rate picked up to 4.67%, 10.4 basis points higher than the 4.566% logged during the previous auction.

At the secondary market prior to the auction, three-month and six-month papers were quoted at 3.6614% and 4.13%, while one-year securities fetched a 4.4804% yield.

The 91-day T-bill rallied to fetch a lower yield of 3.2191% at the close of the trading, while the 182-day papers saw its rate rise slightly to 4.1443%. The yield on the 364-day securities also climbed to 4.5305%.

National Treasurer Rosalia V. De Leon said on Monday that the preference of market players “continues to be on the short-dates papers, particularly on the 91-day” papers.

“But there’s still very healthy bids for the bills at this time. Again, they still don’t want to lock up in the long end of the curve,” Ms. De Leon told reporters after the auction.

She added banks sought higher returns for the six-month and one-year T-bills following the faster-than-expected inflation print last month.

Last week, the Philippine Statistics Authority announced that headline inflation accelerated to a fresh five-year high of 5.2% in June.

Last month’s inflation print surged from May’s 4.6% figure and was faster than the 4.7% median in a BusinessWorld poll.

The latest figure also exceeded the 4.3-5.1% estimate range of the Bangko Sentral ng Pilipinas (BSP) and the 4.9% estimate of the Department of Finance.

Price increases in June were led by alcohol and tobacco (20.8%), transport (7.1%), as well as food (6.1%).

“They’re really asking [for higher returns] because of the expectations that there’s pressure again for the BSP to continue hiking,” Ms. De Leon added.

Last week, BSP Governor Nestor A. Espenilla, Jr. said the monetary authority will “review and update our situational assessment and forecast inflation path.”

“This will shape the strength and timing of our next monetary policy response to firmly anchor inflation expectations,” Mr. Espenilla said.

The BSP has already raised its rates twice this year, with borrowing costs now within a 3-4% range.

On the other hand, the national treasurer said the market also priced in the jobs data in the United States released last week.

The US economy added 213,000 jobs in June, data released on Friday showed, versus the 195,000 market expectation in a Reuters poll. However, unemployment rose to four percent in the same month as more people sought new jobs.

“There’s also pressure for the [US Federal Reserve] also to have another rate hike,” Ms. De Leon said.

Meanwhile, a trader said good demand continued to be reflected in the T-bills auction yesterday.

“We continue to see the demand still on the shortest tenor. It’s also being reflected on the decline in the rate,” the trader said in a phone interview, adding that “persistent domestic inflation and higher budget deficit” remained to be concerns.

The Treasury is set to raise P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in Treasury bonds.

The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal