Gov’t fully awards T-bills even as yields rise on inflation bets

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday even as rates edged up across the board due to cautious investor sentiment.

The Bureau of the Treasury (BTr) raised P15 billion as planned via its auction of T-bills on Monday, with total tenders reaching P49.323 billion, making the offering more than three times oversubscribed. The demand for the papers, however, was smaller than the P53.567 billion bids seen in last week’s auction.

Broken down, the Treasury raised P5 billion as programmed via the 91-day debt papers from P16.55 billion in bids. The three-month T-bills fetched an average rate of 1.044%, up by 1.3 basis points (bps) from the 1.031% quoted at last week’s auction.

It also borrowed the planned P5 billion from the 182-day T-bills after the tenor attracted bids worth P16.112 billion. The average rate of the six-month debt inched up by 1.9 bps to 1.351% on Monday from 1.332% previously.

Lastly, the BTr made a full P5-billion award of the 364-day securities it offered on Monday as tenders hit P16.661 billion. The one-year debt papers were quoted at an average rate of 1.568%, a tad higher than the 1.562% seen in the previous auction.

National Treasurer Rosalia V. de Leon said the rates of the T-bills inched higher on Monday as threats to economic recovery linger, even after the latest manufacturing Purchasing Managers’ Index (PMI) reading signaled improving conditions.

The Philippine manufacturing PMI rose to 50.8 in June from 49.9 in May, the first time since March that the index breached the 50 neutral mark that separates contraction from expansion.

Ms. De Leon said investors remain cautious due to the new Delta variant of the coronavirus disease 2019 (COVID-19) and elevated inflation.

On the other hand, a bond trader said market players asked for slightly higher rates at Monday’s auction because T-bill yields are already too low due to their steady decline in previous offerings.

Other investors may have also placed higher bids in case inflation increased faster than expected last month, the trader said.

Health officials said there has been no local transmission of the Delta variant of COVID-19 in the Philippines so far as travelers are being strictly monitored for possible infections.

Meanwhile, headline inflation may have eased slightly in June amid improving food supply conditions and lower transport prices.

A BusinessWorld poll of 14 analysts held last week yielded a median estimate of 4.3% for June headline inflation, matching the midpoint of the 3.9% to 4.7% estimate given by the Bangko Sentral ng Pilipinas (BSP) for the month.

If realized, June would mark the sixth consecutive month that inflation went beyond the BSP’s 2-4% target and would also be faster than the 2.5% print logged in the same month last year. Still, the month’s headline print would be slower than the 4.5% logged in May.

The Philippine Statistics Authority will report June inflation data on Tuesday.

The BTr will also offer on Tuesday P35 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of six years and nine months.

The Treasury is looking to raise P235 billion from the local market this month: P60 billion via weekly offers of T-bills and P175 billion from weekly auctions of T-bonds.

The government wants to borrow P3 trillion from domestic and external sources this year to fund a budget deficit seen to hit 9.3% of the economy. — B.M. Laforga