THE GOVERNMENT fully awarded P15 billion worth of Treasury bills (T-bill) on Monday even as yields rose across- the-board amid expectations that inflation picked up further in August.
The Bureau of the Treasury (BTr) raised P15 billion as programmed at its auction yesterday, with total tenders reaching nearly twice as much the offer at P27.5 billion.
Broken down, the BTr awarded P4 billion as planned in the 91-day debt papers. Tenders reached as much as P6.225 billion, with average yields ending 0.7 basis point (bp) higher at 3.225% from 3.218% in the previous auction.
Meanwhile, the government borrowed the programmed P5 billion via 182-day T-bills, with demand reaching more than twice the offer at P11.601 billion. The papers fetched a 4.101% rate, climbing 3.1 bps from the previous auction’s 4.07%.
The Treasury also raised P6 billion as planned from the one-year papers, with overall tenders at P9.64 billion. The T-bills were quoted at 4.899%, up 2 bps from the previous week’s 4.879%.
At the secondary market yesterday, ahead of the auction, the 91-day T-bills were quoted at 3.6518%, while the 182-day papers fetched 4.096%. The 364-day debt, meanwhile, yielded 5.0867%.
At the close of trading on Monday, the three tenors rallied to fetch lower rates. The three-month papers were quoted at 3.192%, while the yield on the six-month securities inched down to 4.0958%. The one-year papers, on the other hand, yielded 4.881%.
National Treasurer Rosalia V. de Leon said the rise in rates was within its own estimate, noting this signals that market expectations of further monetary tightening may have already eased.
“The rates are within our own assessment, given we have our own internal models. In terms of the increase, it’s like just 1-3 basis points… And at the same time, coming from the 100 basis points of the hike of the Monetary Board, I suppose there’s already some comfort from the market about the current rates,” Ms. De Leon said after yesterday’s auction.
The Bangko Sentral ng Pilipinas’ (BSP) Monetary Board has hiked rates by a cumulative 100 bps this year, delivering a strong 50-bp increase at its August meeting as inflation continued to scale multi-year highs.
However, traders interviewed yesterday said they expect another round of policy hikes in the central bank’s next rate-setting meeting as inflation has yet to slow down.
“The market still is anticipating one last hike from the BSP. Even if [inflation] nears its peak, it is still above target,” a trader said in a phone interview.
Another trader said separately that the greater volume of bids for the shorter-dated securities shows interest rates are likely to increase further, which is also supported by similar moves by the US Federal Reserve.
“Nobody wants the one-year [T-bills]. The expectation is they (BSP) will hike again. You can see a lot of pooled funds more of in the middle. Ideally, it should be in the three months, but the yields are not that attractive as the six months,” the second trader said in a phone interview.
“Even in the US, they will also hike. So because of the tightening of rates widely expected in September with the Fed, and for us, it’s more anticipated. So the volume is more focused on the six months. Nag play safe sila (They played safe),” the trader added.
The government will release August inflation data on Wednesday. A BusinessWorld poll of economists yielded a median estimate of 5.9% for headline inflation, faster than the 5.7% in July and 2.6% in August last year.
The BSP, meanwhile, said August inflation could have settled within a 5.5-6.2% range.
The Treasury wants 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. — E.J.C. Tubayan

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