Gov’t upsizes T-bill award as rates decline further

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THE GOVERNMENT Hiked its award of Treasury bills on Monday as rates continued to drop on the back of strong demand from investors looking for higher yields. — BW FILE PHOTO

THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded for the seventh straight week on Monday as demand remained high despite faster inflation and as rates continued to drop.

The Bureau of the Treasury (BTr) raised P24 billion from its offer of T-bills on Monday, higher than the P20-billion program, after it accepted more non-competitive bids for the three-month and six-month papers. It also opened its tap facility to offer another P5 billion in one-year securities.

The BTr has made above-program awards of its weekly T-bill offers since the start of the year

Total bids for the T-bills hit P88.61 billion on Monday, making the offer more than four times oversubscribed. However, this was lower than the P95.35 billion in tenders seen for last week’s offering.

Broken down, the BTr awarded P7 billion in 91-day debt papers, higher than its plan to raise P5 billion, as tenders reached P17.45 billion. The three-month T-bills fetched an average rate of 0.845%, down by 0.1 basis point (bp) from the 0.846% quoted last week.

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The Treasury also borrowed P7 billion from the 182-day T-bills against the P5-billion program after bids hit P30.05 billion. The average rate of the six-month papers went down by 4.8 bps to 1.046% from the previous week’s rate of 1.094%.

Lastly, for the 364-day securities, the government made a full P10-billion award as it received tenders worth P41.11 billion. The average rate of the one-year papers stood at 1.416%, 3 bps lower than the 1.446% seen last week.

National Treasurer Rosalia V. de Leon said the oversubscription seen for Monday’s offering showed the market is still flush with cash and that investors remain interested in putting their money in government debt despite the uptick in inflation.

“Liquidity continues to overflow. Market sees a spike in prices as temporary, with supply constraints and inflation dialing back to the middle of the target next year,” Ms. De Leon said.

Headline inflation quickened to 4.2% in January from the 3.5% logged in December, hitting a two-year high as food and transport prices continued to increase.

Despite this, the central bank on Thursday kept benchmark interest rates at record lows to support the Philippine economy’s recovery from the coronavirus pandemic. In its first policy setting for the year, the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board maintained the overnight reverse repurchase rate at a record low of 2%. The rates on its lending and deposit facilities were likewise kept at 2.5% and 1.5%, respectively.

However, the BSP raised its average inflation forecast for the year to 4%, the upper end of its 2-4% target for 2021, from 3.2% previously. Meanwhile, it lowered its inflation forecast for next year to 2.7% from 2.9% previously.

Meanwhile, a bond trader said the bids seen for Monday’s T-bill offering were largely driven by end-user demand as investors search for yields higher than time deposit rates.

“Mostly invested in T-bills are funds intended for savings/time deposit which is at 0.5% per annum,” the trader said via Viber.

The government is also offering three-year retail Treasury bonds (RTBs) until March 4, unless closed earlier. The bonds carry a rate of 2.375% and are being sold for a minimum investment of P5,000.  During the rate-setting auction last week, the BTr sold an initial P221.218 billion in RTBs.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga

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