Gov’t makes full award of T-bills as demand soars

By Karl Angelo N. Vidal, Reporter
THE GOVERNMENT made another full award of the Treasury bills (T-bill) it auctioned off on Monday as investors were more confident to lock in their funds following the latest rate hike of the central bank.
The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction yesterday as the offer was twice oversubscribed, with total bids amounting to P30.28 billion — higher than the P28.64 billion tallied at last week’s offering.
Broken down, the government fully awarded the 91-day papers, accepting P4 billion out of total tenders amounting to P4.74 billion. Its average yield climbed 12.3 basis points (bp) to 5.295% from 5.172% in the previous auction.
The Treasury also accepted P5 billion in bids as planned for the 182-day debt out of the P11.928 billion offered by banks and other financial institutions. The average rate likewise rose by 3.5 bps to 6.28% from the 6.245% quoted in the previous offering.
The government likewise made a full award of the 364-day T-bills, borrowing the programmed P6 billion from total offers totalling P13.612 billion. The average yield was almost flat, rising by a mere 0.9 bp to 6.521%.
Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 5.339%, 6.155% and 6.545%, respectively, yesterday.
National Treasurer Rosalia V. De Leon said the Treasury saw a “good auction” yesterday, particularly for the six-month and one-year papers, with investors more comfortable with putting their funds in the longer-termed T-bills after another rate hike from the Bangko Sentral ng Pilipinas (BSP) last week.
“We [had] a good auction as we saw oversubscription… So investors are already locking in given after the 25-bp hike by the MB (Monetary Board),” Ms. De Leon told reporters following the auction.
At its Thursday meeting, the BSP’s policy-setting Monetary Board fired off another 25-bp hike in policy rates, following increases worth a cumulative 150 bps since May.
Following this, the central bank said it now expects inflation to clock in slower in the coming months, with price increases seen to settle below 4% over the next two years.
“I also think that the central bank already cemented with a 25-bp hike in terms of expectations on further the inflationary path so inflation expectations will also be well anchored,” Ms. De Leon added.
“So investors see that we are able to…temper inflation with all these actions coming from the MB as well.”
Inflation steadied at 6.7% in October, matching September’s print which was a nine-year year high. Likewise, month-on-month inflation eased to 0.3% coming from the 0.9% logged in September.
Meanwhile, a bond trader said the auction result was within expectations except for the 91-day papers which fetched a rate that was higher than expected.
“I think there was a lukewarm demand for the 91-day [T-bills] due to better yields of the longer tenors, so the yields on the 182- and 364-day papers were more attractive,” the trader said in a phone interview.
DOLLAR BONDS
Meanwhile. Ms. De Leon said the BTr is assessing market conditions for the timing of its issuance of dollar-denominated Republic of the Philippines (RoP) bonds following the deepening trade tensions between China and the United States.
“We continue to watch the market because this trade tension was reignited,” she said.
The world’s two largest economies traded barbs ahead of the Asia-Pacific Economic Cooperation Summit held in Papua New Guinea. In his speech, Chinese President Xi Jinping criticized Washington’s trade protectionism, while US Vice President Mike Pence said the tariffs on $250-billion worth of Chinese goods will remain in place until Beijing changed its ways.
“We want to see first more stable environment for us to be able to come out and do the issuance,” Ms. De Leon said. “And of course, we like to see more reasonable rates for the RoP.”
The Treasury said in September it is still looking at issuing RoP bonds this quarter. In January, the country returned to the global bond market after four years, offering 10-year dollar-denominated global bonds worth $2 billion which carry a 3% coupon.
Meanwhile, the government is also looking at issuing yuan- and yen-denominated papers to maintain its presence in the Chinese and Japanese capital markets.