Gov’t upsizes T-bills volume as rates go down

THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded on Monday as rates declined across the board on high demand for the safe assets amid lingering inflationary concerns.

The Bureau of the Treasury (BTr) borrowed P17 billion via the T-bills on Monday, bigger than the initial plan to raise just P15 billion as total tenders reached P63.865 billion.

The auction was more than four times oversubscribed but the demand was smaller than the overall bids worth P72.5 billion seen in the previous offering last week.

Broken down, the BTr raised P5 billion as planned in 91-day debt papers from P17.24 billion in tenders. The average rate of the three-month debt went down by one basis point (bp) to 1.06% from 1.07%, previously.

It also raised P5 billion as planned in 182-day T-bills as the tenor attracted bids worth P21.505 billion. The six-month debt fetched an average rate of 1.385%, down by 0.4 bp from 1.389% a week ago.

Lastly, the government borrowed P7 billion via the 364-day securities, upsizing from the programmed P5 billion as tenders hit P25.12 billion. The average yield on the one-year bond also fell by 1.5 bps to 1.582% from 1.597 bps.

“Liquidity [is] very much around, [coupled with] P22 billion in maturities this week. Placements remain in short tenor buckets,” National Treasurer Rosalia V. de Leon told reporters in a Viber message on Monday.

A bond trader said rates fell within market expectations after the Bangko Sentral ng Pilipinas (BSP) maintained its key policy rates at the current record low.

The BSP kept benchmark interest rates unchanged at 2% during its policy meeting last Thursday as widely expected, citing the need to support a fragile economic recovery.

Rates fell as strong demand on the bills prevailed, according to the trader who said investors preferred safer short-term assets over long-dated bonds due to lingering inflationary concerns.

The BSP last week raised its inflation outlook for the year to 4.4% from 4.1% previously as supply issues continue to push food prices higher. This is beyond the 2-4% target of the central bank for 2021.

Headline inflation quickened to 4.9% in August from 4% in July, its fastest pace in more than two years, to bring the eight-month average to 4.4%, which is above the central bank’s target.

The BTr made a full award of the T-bills it offered last week as rates dipped across the board and total bids went up to P72.5 billion from P63.27 billion the week prior.

On Tuesday, the BTr will also auction off P35 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and nine months.

The Treasury is looking to raise P250 billion from the local market this month: P75 billion via weekly offers of T-bills and P175 billion from weekly auctions of T-bonds.

The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of gross domestic product. — Beatrice M. Laforga