Gov’t makes full award of T-bills as rates drop on inflation outlook

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday as yields inched lower across-the- board on expectations of a slower inflation print last month.

The Bureau of the Treasury (BTr) borrowed P22 billion on Monday, bigger than its original program of P20 billion, as the government hiked its award of the smallest tenor to accommodate demand. The offering was over four times oversubscribed as bids reached P98.858 billion.

Broken down, the BTr borrowed P7 billion via the 91-day papers versus its original program of P5 billion as it accepted more bids from small investors, with total bids reaching P25.235 billion. The tenor fetched an average rate of 1.116%, down by 0.5 basis point (bp) from the 1.121% seen in the previous auction.

The government also awarded P5 billion as planned in 182-day T-bills as tenders for the tenor totaled P29.164 billion. The six-month papers fetched an average rate of 1.6%, marginally lower than the 1.601% seen last week.

Lastly, the Treasury likewise borrowed the programmed P10 billion via 364-day papers as total tenders reached P44.459 billion. The one-year debt was quoted at an average rate of 1.8%, declining by 5.8 bps from the 1.858% fetched in the previous offering.

National Treasurer Rosalia V. de Leon said investors asked for lower yields as they expect inflation to have slowed further in September.

“[There were] lower rates and high bids to cover as the inflation print in September is expected to trend lower than last month,” Ms. De Leon said in a Viber message to reporters after the auction.

A trader said in a Viber message that T-bill rates fetched yesterday were within market expectations following the central bank’s September estimate for headline inflation. The Bangko Sentral ng Pilipinas (BSP) last week said it expects September inflation to have settled within 1.8% to 2.6%, within its 2-4% target for the year.

A BusinessWorld poll of 16 economists held last week yielded a median headline inflation estimate of 2.3%. If realized, this will be the second consecutive month of slower inflation following the 2.4% pace in August. However, this is faster than the 0.9% logged in September 2019 which was the slowest pace since the 0.7% seen in April 2016.

The Philippine Statistics Authority will report September inflation data on Oct. 6.

Another trader said in a Viber message that lower yields seen for the T-bills yesterday also indicated ample liquidity among investors.

“The market right now is still very liquid and it’s just prudent to put excess cash at the short end of the curve amid ongoing uncertainties,” the second trader said.

On Tuesday, the BTr will auction off reissued three-year Treasury bonds (T-bonds) worth P30 billion. The bonds have a remaining life of two years and 11 months.

The Treasury is looking to raise P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly T-bond auctions.

The government wants to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — K.K.T. Jose