By Elijah Joseph C. Tubayan, Reporter
THE BUREAU of the Treasury (BTr) fully awarded P15 billion worth of government securities on Monday with relatively flat yields across the board, as the market expects inflation to have peaked last quarter.
The government raised P15 billion as programmed from its Treasury bills (T-bill) auction yesterday, with total tenders reaching nearly twice the offer at P28.64 billion.
Broken down, the BTr awarded the programmed P4 billion in 91-day debt papers, which saw tenders reaching as much as P6.86 billion. Average yields were 9.5 basis points (bp) higher at 5.172% from 5.077% in the previous auction.
Meanwhile, it borrowed P5 billion from the 182-day T-bills, with bids reaching double the offer size at P10.278 billion. The papers fetched an average rate of 6.245%, 1.2 bps higher than last auction’s 6.233%.
The government also raised P6 billion as planned from one-year papers as the offer was almost twice oversubscribed, with tenders reaching P11.503 billion. The papers saw their average yields rising by 1.5 bps to 6.521% from 6.506% last week.
According to the PHP Bloomberg Valuation Service (BVAL) Reference Rates, the 91-, 182- and 364-day papers were quoted at 5.227%, 6.005% and 6.523%, respectively, yesterday.
National Treasurer Rosalia V. De Leon said the market expects inflation to slow down in the succeeding months, based on the greater demand seen for the longer-dated tenors yesterday.
“It’s a very healthy auction. We saw rates really flat that the rates plateaued for both the 182 and 364. So very marginal, 1.5 to 1.2 basis points increase over last week’s auction, and it’s aligned with the secondary market BVAL rates,” Ms. De Leon told reporters after the auction.
“This just shows that for the market, they see inflation has really already flattened. It has plateaued,” she added.
Inflation stood at 6.7% in October, steady from the previous month, but still a nine-year high. The month-on-month figure, however, slowed to 0.3% from 0.9%.
Traders also noted that there is more evidence that inflation will slow further towards 2019, as forecasted by local authorities.
“We see inflation already easing, especially in food. World crude is also going down, and also the peso strengthening. There seems to be no upward pressure on inflation moving forward,” a trader said in a phone interview.
The trader added that due to prospects of easing inflation, the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board will likely hold off on further tightening moves in their policy meeting on Thursday.
“We see the central bank pausing for now,” the trader said.
A BusinessWorld poll showed economists split on the BSP’s policy stance this week, with six of the 11 polled expecting steady interest rates and five seeing at least a 25-bp hike.
The Monetary Board has raised benchmark rates by a cumulative 150 bps since May.
Another trader shared the same sentiment, noting that the 6.1% economic growth performance in the third quarter strengthens the case for keeping policy rates steady.
“The auction was expected. Bidders were locking in with just about the same rates as last week as they see the BSP to hold in the next meeting. As you see inflation has seemed to start its decline, and that the GDP (gross domestic product) growth is at the low-end of the government’s target so they may consider that,” the second trader said in a separate 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.
“As far as our funding program is concerned, we are on track,” Ms. De Leon said yesterday.