THE GOVERNMENT made another full award of the Treasury bills (T-bill) it auctioned off on Monday, with rates on the longest tenor slipping as investors expect inflation to start stabilizing.
The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction yesterday. The offer was oversubscribed, with total tenders totalling P26.985 billion, climbing from the P24.51 billion recorded at last week’s offering.
Broken down, the government borrowed P4 billion as planned via the 91-day tenor yesterday as bids by investors amounted to P5.936 billion. The average rate rose just 2.7 basis points (bp) to 4.979% from the 4.952% logged in the previous auction.
The Treasury also made a full award of the 182-day papers as it accepted P5 billion as planned out of offers totalling P7.534 billion. The average yield likewise rose 10 bps to 6.159% from last week’s 6.059%.
For the 364-day T-bills, the BTr borrowed the programmed P6 billion out of the P13.515 billion tendered by banks and other financial institutions. The strong demand caused the average rate to slide 7.9 bps to 6.41% from the 6.489% tallied in the previous offering.
At the secondary market prior to the auction, the three- and six-month papers were quoted at 5.83261% and 6.19367%, respectively, according to the Bankers Association of the Philippines’ new set of benchmarks, the PHP Bloomberg Valuation Service (BVAL) Reference Rates — which replaced the Philippine Dealing System Treasury Reference Rates — while the one-year debt was quoted at 6.5951%, according to the Treasury.
At the close of the trading, the BVAL rates for the 91-day, 182-day and 364-day papers stood at 5.926%, 6.276% and 6.586%, respectively.
National Treasurer Rosalia V. De Leon said it made a full award as bids stabilized yesterday.
“We saw the bids more or less hopefully have stabilized coming from where they were before [at] 30-50 bps increase in the auction submissions,” Ms. De Leon told reporters on Monday. “[It probably came] from the statement that more or less inflation has stabilized last September.”
The Bangko Sentral ng Pilipinas (BSP) earlier indicated that inflation has peaked in the third quarter of the year and is expected to begin moderating.
Monetary Board Member Felipe M. Medalla said the proposed rice tariffication law — which would remove price import quotas set by the government and allow any private firm to source the crop abroad — will shave 0.7 percentage points of the headline inflation print.
Meanwhile, BSP Assistant Governor Francisco G. Dakila, Jr. said the proposal to suspend the scheduled P2 per liter fuel excise tax in 2019 would also reduce inflation by 0.2 percentage points.
Inflation hit a fresh nine-year high of 6.7% in September, bringing the year-to-date print to five percent.
“Going into next year, they see that possibly, inflation is going to be 4.3% on average,” Ms. De Leon said, adding that the rice tariffication as well as the suspension of additional excise tax on fuel would bring the inflation within the target band.
Meanwhile, a bond trader said the results of the T-bills auction were in line with expectations.
“I guess investors are just looking for higher yields, that’s why the demand was on the one-year [tenor],” the trader said in a phone interview.
The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 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.
Meanwhile, Ms. De Leon said the BTr is “closely looking” at the structure of floating-rate notes as it is talking to market makers to monitor the appetite for the instrument.
“We are really interested to be able to issue in the market. We are already talking with our market makers about the appetite, structure, benchmarks and also in terms of the infrastructure in their own systems,” she said.
An FRN or floater is a debt instrument that carries a varying interest rate, depending on a benchmark. However, it yields lower returns compared with fixed-rate papers of the same maturity date.
Ms. De Leon added that the Treasury still does not have any timeline for the issuance, although it is “looking at around two years in terms of the tenor.” — Karl Angelo N. Vidal

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