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Gov’t makes full award of T-bills with offer twice oversubscribed

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THE GOVERNMENT made a full award of the Treasury bills (T-bill) it auctioned off on Monday, with the rate of the longest tenor even slipping a tad as investors expect inflation to decelerate.

The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction yesterday. Total tenders from market participants reached P35.583 billion, higher than the P29.28 billion fetched at last week’s auction and over two times the offer.

Broken down, the government borrowed P4 billion as planned via the 91-day tenor yesterday as tenders reached P6.805 billion. The average rate for the papers went up 9.9 basis points (bp) to 5.394% from the 5.295% fetched at the auction last Nov. 19 and from the full rejection the Treasury made for the tenor last week.

For the 182-day bills, the Treasury borrowed P5 billion as planned out of total bids totalling P12.998 billion. Its average yield increased 1.1 bps to 6.305% from last week’s 6.294%.

The government also made a full award of the 364-day papers, accepting the programmed P6 billion out of total offers amounting to P15.78 billion. The average yield, on the other hand, declined 4.3 bps to 6.507% from the 6.55% quoted in the previous offer.

Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 5.497%, 6.245% and 6.5872% yesterday, respectively.

National Treasurer Rosalia V. De Leon said the Treasury was pleased with the auction’s oversubscription.

“It’s very timely given that the market analysts’ [inflation] consensus is at 6.3%. [The market is expecting] that inflation is already going down,” Ms. De Leon told reporters yesterday.

Inflation is widely expected to have slowed in November from a nine-year peak on the back of lower oil prices and improved food supply.

A BusinessWorld poll among 14 economists yielded a 6.3% median estimate for the month, slower than the actual 6.7% print in September and October.

The median also falls within the 5.8-6.6% estimate range of the Bangko Sentral ng Pilipinas (BSP).

“They would also lock in already the rates at these levels since the inflation continues a downward trajectory,” Ms. De Leon said. “Given the price pressures have receded, there’s a case already for the Monetary Board to take a pause in monetary tightening.”

The BSP’s policy-setting Monetary Board has raised key rates by a cumulative 150 bps since May to arrest inflation expectations.

Ms. De Leon added that the US Federal Reserve is expected to pause its tightening following the pronouncements of Fed chief Jerome Powell that its rates are close to neutral.

“I think the Fed wants to see the impact of the rate hikes to the economy since there is a lag effect in terms of its effects.”

Meanwhile, a bond trader said the result of yesterday’s auction was within expectations as rates moved sideways with an upward bias.

“The rate for the one-year papers slid due to higher demand in the longer tenors,” the trader said in a phone interview. “Most probably, we can expect the same demand until the yearend. Ganyan na ang (That’s going to be the) demand on the short tenors.”

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. — K.A.N. Vidal