Gov’t partially awards T-bills as yields ascend across the board

THE GOVERNMENT partially awarded Treasury bills (T-bills) offered in Thursday’s auction as yields rose across the board, with the market seeing higher possibility of a US Federal Reserve interest rate hike next month.

The Bureau of the Treasury awarded P18.5 billion out of the planned P20-billion borrowing yesterday from the three-month, six-month and one-year debt papers. The offer was oversubscribed, with bids reaching P29.9 billion.

Auctioned T-bills have reduced maturities given the adjusted settlement date in line with the country’s hosting of the Association of Southeast Asian Nations Summit earlier this week.

Broken down, the Treasury fully awarded the 89-day papers after total bids reached P12.92 billion, higher than the P8 billion offered. The papers fetched an average rate of 2.148%, up by 19.1 basis points (bps) from the 1.957% booked during the Oct. 23 auction.

The government also raised P6 billion worth of 180-day bills as planned at an average rate of 2.563%, 10.6 bps higher than the previous auction’s 2.457%. The debt papers were met with P10.87 billion worth of demand.

Meanwhile, the 362-day debt papers were partially awarded, with the government set to issue just P4.5 billion worth of the tenor against the P6.15 billion the banks sought to buy and the P6 billion up for grabs. The T-bills carried an average yield of 2.952%, higher by 9.9 bps than the 2.853% rate at the last auction.

Prior to yesterday’s auction, the three-month, six-month and one-year T-bills were quoted at yields of 2.6736%, 3.0107% and 2.9073%, respectively.

At the close of trading, the 91- and 182-day papers rallied, fetching rates of 2.151% and 2.5876%, respectively. Meanwhile, the yield on the 364-day T-bill dropped to 2.9237%.

National Treasurer Rosalia V. de Leon said yields inched up as market players see a likely Fed interest rate hike before the end of the year.

“We’ve already seen [this] even during previous [Treasury bonds auction], the market is already inputting the 97% possibility of a Fed rate hike…,” Ms. De Leon told reporters.

Traders meanwhile said the uptick in yields was within expectations.

“As expected, higher by around five to ten basis points [compared with the previous] auction. I think maybe as the rest of the curve increased ahead of the Treasury bill auction, so it aligned,” a trader said.

Another trader attributed the higher yields to the release of the country’s gross domestic product (GDP) growth data for the third quarter, which showed that the Philippine economy expanded by 6.9% in the period.

“The GDP was strong so that’s higher inflationary expectation,” the first trader said, adding that the “new supply in the short-end in the planned RTB (retail Treasury bonds)” was also at play.

Meanwhile, Ms. De Leon announced after the auction that they will be offering RTBs for the second time this year in time for the holidays.

“This is why we’re offering the comeback of the RTB [because we’ve seen that there’s a lot of liquidity],” Ms. De Leon said, noting that the strong appetite in the retail sector also compelled them to issue another batch of the retail bonds the year.

“During the April issuance, we saw a very strong yet unmet demand [because we saw a demand] around the P500 billion, [yet] we just accepted P180 billion.”

Ms. De Leon said the Development Bank of the Philippines and the Land Bank of the Philippines will lead the offering, while China Banking Corp., BDO Unibank, Inc., Bank of the Philippine Islands, and Security Bank Corp. will act as selling agents.

Asked about the bonds’ indicative rate, Ms. De Leon said they will have to “align with the market.”

The offer period will be from Nov. 20 to 29, while the issue date will be on Dec. 4. — Karl Angelo N. Vidal