T-bills fully awarded even as rates climb

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THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered yesterday on the back of strong demand and while the market looks ahead to November inflation data set to be released later this week.

The Bureau of the Treasury (BTr) awarded P20 billion as planned via the T-bills it offered on Monday out of total tenders worth P40 billion or twice as much as the programmed offering.

The Treasury raised P8 billion as planned via the 91-day T-bills out of total bids worth P10.46 billion. The three month papers yielded an average rate of 3.192%, slightly higher by 2.4 basis points (bps) from the 3.168% fetched during the last auction on Nov. 18.

For the 182-day papers, the government also fully awarded the P6 billion it offered at an average rate of 3.348%, inching up by 9.9 bps from the 3.249% recorded previously.

A bond trader interviewed Monday said the rates on the six-month securities were slightly higher than what the market expected because of weak demand, as the tenor attracted bids worth P6.827 billion.

Meanwhile, the Treasury also borrowed P6 billion as planned from the 364-day papers out of tenders amounting to P23.101 billion. The one-year T-bills fetched a lower average rate of 3.475% against the last auction’s 3.501%.

At the secondary market on Monday, yields on the three-month, six-month, and one-year T-bills stood at 3.168%, 3.324%, and 3.583%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

Strong demand for the one-year tenor prompted the Treasury to open the tap facility and raise another P6 billion, National Treasurer Rosalia V. de Leon told reporters after the auction.

Ms. De Leon said the committee decided to make a full award of the T-bill offer as rates fell within their expectations in anticipation of latest inflation data.

“Even for the expectations for November (inflation data), it’s going to be 0.9% to 1.7% already, so for the shorter tenors, rates slightly (went up),” she said when asked why the rates for shorter tenors increased.

BusinessWorld’s poll of 16 economists bared a median estimate of 1.2% for November headline inflation, a pickup from the previous month’s record of 0.8% but still within the 0.9-1.7% range forecast by the Bangko Sentral ng Pilipinas’ Department of Economic Research.

Latest inflation data will be released on Thursday by the Philippine Statistics Authority.

For the bond trader, the market has more appetite for longer tenors amid positive sentiment on the economy’s growth.

“The market has more appetite on the longer tenor because they can see the economy to grow at 6-7% until 2020, so maybe there’s more appetite for long term because of positive sentiment,” the trader said in phone call.

The economy expanded at a faster clip in third quarter at 6.2%, picking up from the 5.5% and 5.6% recorded in the second and first quarters, respectively.

This brought gross domestic product (GDP) growth for the nine-month period to average at 5.8%, against the 6-7% target band set by the government for 2019.

Economic managers earlier said they are optimistic the economy can reach the low end of the target range, even if it would take a 6.7% GDP growth in the fourth quarter to achieve this.

The Treasury has set a P220 billion borrowing program this quarter for the local market, broken down into P100 billion in T-bills and P120 billion via Treasury bonds.

The government is planning to raise P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product

Meanwhile, one week since the instruments were launched, Ms. De Leon said its Premyo bond offering was met by strong demand, especially from its target market or individuals which comprised 80-90% of the total investors.

“After one week, we’re very encouraged by the reception particularly on the individuals, for the individuals also we see (them) opening an account, to be able to participate because you need a depository account to invest in Premyo bonds,” she said.

She said so far, total investments for the bonds are now at more than half the initial P3-billion offer. However, she said the committee will decide towards the end of the week if they will upsize the volume or cut short the offer period.

“We’re a little more than half of that (P3 billion)…the way we see this morning. But we still don’t have (official data) kasi (because) they still have to submit around 1 to 2 p.m.,” she told reporters on Monday.

The government is looking to raise P3 billion via the Premyo bonds with a minimum investment of P500, while giving investors a chance to win prizes up to P1 million in cash and condominium units. The offer period is set to run from Nov. 25 to Dec. 13. — Beatrice M. Laforga