THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday as its rate went down following the release of data showing slower-than-expected inflation last month.

The Bureau of the Treasury (BTr) on Tuesday raised P35 billion as planned via the reissued seven-year T-bonds with a remaining life of six years and nine months.

Total bids for the papers reached P61.175 billion on Tuesday, making the offering nearly two times oversubscribed. This caused the Treasury to open its tap facility to raise an additional P5 billion from the tenor.

However, Tuesday’s demand was lower than the P84.31 billion in tenders seen in the previous auction of the series on May 18.

The reissued seven-year bonds fetched an average rate of 3.576% on Tuesday, down by 10 basis points (bps) from 3.665% quoted in the previous as well as the 3.625% coupon of the series.

However, this was 10.8 bps higher than the 3.468% quoted for the seven-year tenor at the secondary market prior to the auction.

National Treasurer Rosalia V. de Leon said the T-bonds fetched a lower rate at Tuesday’s offering after the Philippine Statistics Authority (PSA) reported early on Tuesday that inflation slowed in June.

“The average rate in [Tuesday]’s auction is higher than the last dealt level of 3.55% at market earlier. Just shows that investors would like to ask for higher yield since it is long and wary of upside risks to CPI (consumer price index) given the behavior of crude prices in the world market,” a bond trader said via Viber on Tuesday.

Inflation eased to a six-month low in June, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary data from the PSA showed headline inflation stood at 4.1% in June, easing from the 4.5% logged in May and the slowest rate in six months or since the 3.5% recorded in December 2020. However, this was above the 2.5% recorded in June last year.

The latest headline figure was lower than the 4.3% median in a BusinessWorld poll conducted late last week. It likewise fell within the 3.9%-4.7% estimate given by the Bangko Sentral ng Pilipinas (BSP) for June, but was still higher than the central bank’s 2-4% target for the year.

For the first half, headline inflation averaged 4.4%, also above the BSP’s target band and its 4% forecast for 2021.

Meanwhile, international benchmark Brent crude oil was trading above $77 a barrel on Monday, or 1.2% higher in the session, as OPEC+ ministers called off oil output talks after clashing last week when the United Arab Emirates (UAE) rejected a proposed eight-month extension to output curbs, meaning no deal to boost production has been agreed, Reuters reported.

Saudi Energy Minister Prince Abdulaziz bin Salman had called for “compromise and rationality” to secure a deal after two days of failed discussions last week.

But four OPEC+ sources said there had been no progress. OPEC’s Secretary General Mohammad Barkindo said in a statement on Monday the meeting had been cancelled, without a date for the next one being agreed.

Some OPEC+ sources said there would be no oil output increase in August, while others said a new meeting would take place in the coming days and they believed there will be a boost in August.

Oil prices are at the highest since 2018 and have already prompted concerns inflation could derail a global recovery from the pandemic.

OPEC+ agreed record output cuts of almost 10 million barrels per day (bpd) last year, about 10% of world output, as the pandemic hit. The curbs have been gradually relaxed and stand at about 5.8 million bpd.

The UAE, sources said, on Friday accepted a proposal from Saudi Arabia and other OPEC+ members to raise output in stages by about 2 million bpd from August to December but rejected extending remaining cuts to the end of 2022 from a current end date of April without adjusting its current baseline production.

On Monday, OPEC+ sources said the UAE’s position was unchanged. They said a ministerial panel chaired by Saudi Arabia and Russia, the Joint Ministerial Monitoring Committee, needed more time to discuss the issue.

Decisions in OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other big producers, must be unanimous.

The BTr is looking to raise P235 billion from the local market this month: P60 billion via weekly offers of Treasury 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 help fund a budget deficit seen to hit 9.3% of gross domestic product. — B.M. Laforga with Reuters