THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Tuesday even as yields rose across-the-board following the local central bank’s decision to keep rates unchanged and the US Federal Reserve’s announcement of a new policy framework.

The Bureau of the Treasury (BTr) borrowed P20 billion as planned from the T-bills on Monday with the offer more than twice oversubscribed, with tenders reaching P55.736 billion.

The Treasury awarded P5 billion in 91-day securities as programmed out of bids worth P15.213 billion at an average yield of 1.18%. This was up 4.9 basis points (bps) from the 1.131% seen the previous auction.

The government also borrowed P5 billion as planned via the 182-day T-bills as total tenders reached P15.263 billion. The papers were quoted at 1.421%, up by 1.4 bps from the 1.407% quoted during the previous offering.

The Treasury likewise made a full P10-billion award of the 364-day papers it offered yesterday out of P25.260 billion in bids. The one-year T-bills fetched an average rate of 1.788%, higher by 3.7 bps from 1.751% previously.

National Treasurer Rosalia V. de Leon said T-bill yields increased as the Bangko Sentral ng Pilipinas (BSP) paused its easing cycle.

“Rates moved slightly following the Monetary Board’s decision [for a] temporary pause in [policy rate easing], as well as the Federal Reserve’s new framework on inflation target, allowing the yield curve to steepen,” Ms. De Leon told reporters via Viber after the auction.

The BSP’s policy-setting Monetary Board held benchmark rates steady at its review last month on benign inflation and signs of economic recovery following the easing of restriction measures meant to curb the spread of the coronavirus.

Rates on the BSP’s overnight reverse repurchase, lending and deposit facilities are at record lows of 2.25%, 2.75% and 1.75%, respectively.

Meanwhile, the US central bank last week rolled out a sweeping rewrite of its approach to its dual role of achieving maximum employment and stable prices, putting new weight on bolstering the US labor market and less on worries about too-high inflation, Reuters reported.

The Fed’s new monetary policy strategy, unveiled at the start of an annual central banking conference, pledges to address “shortfalls” from the “broad-based and inclusive goal” of full employment, a nod to research showing racial income disparities hold back economic growth.

It also promises to aim for 2% inflation on average, so that periods of too-low inflation would likely be followed by an effort to lift inflation “moderately above 2% for some time.” The change suggests the US central bank’s key overnight interest rate, already near zero, will stay there for potentially years to come as policy makers woo higher inflation.

On the other hand, a trader said T-bill yields rose on Tuesday as investors expect inflation to have quickened in August.

Inflation likely edged higher in August as food prices and transportation costs rose when lockdown restrictions were brought back for two weeks earlier in the month, analysts said.

A BusinessWorld poll of 16 economists last week yielded a median estimate of 2.8%, settling within the middle of the 2.5% to 3.3% estimate of the BSP for the month.

If realized, the median estimate will be slightly faster than the 2.7% seen in July as well as the 1.7% logged in August 2019. However, it will still be within the 2-4% target by the central bank for this year.

Headline inflation averaged 2.5% in the first seven months of 2020. The BSP expects inflation to average 2.6% this year.

The Philippine Statistics Authority will report August inflation data on Friday, Sept. 4.

The Treasury is looking to raise P160 billion from the domestic market in September: P100 billion via weekly auctions of T-bills and P60 billion via Treasury bonds to be offered fortnightly.

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

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