EconomyEditor's PickGov’t partially awards T-bills

November 14, 2022
BW FILE PHOTO

THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday as traders asked for higher yields ahead of the expected rate hike by the Bangko Sentral ng Pilipinas’ (BSP) this week.

The Bureau of the Treasury (BTr) raised just P8.6 billion from the T-bills it auctioned off on Monday, below the P15-billion program, even as bids reached P24.047 billion.

Broken down, the Treasury borrowed P5 billion as planned via the 91-day securities on Monday, with bids reaching P13.7 billion. The average rate of the tenor rose by 11.4 basis points (bps) to 4.464% from the 4.35% fetch for last week’s partial award, with the government accepting offers with yields from 4.35% to 4.54%.

Meanwhile, the government awarded just P2.2 billion in 182-day T-bills, even as tenders for the tenor hit P7.147 billion, above the P5-billion program. The six-month paper fetched an average rate of 4.838%, up by 3.8 bps from the 4.8% quoted for last week’s award, with accepted rates ranging from 4.825% to 4.85%.

Lastly, the BTr borrowed only P1.4 billion via the 364-day debt papers, with demand reaching just P3.2 billion versus the P5 billion on the auction block. The average rate of the one-year paper climbed by 10 bps to 5.1% from 5% last week, with the Treasury only accepting bids with a yield of 5.1%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 4.1094%, 4.6397%, and 5.0454%, respectively, based on the PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“Results were mixed in today’s Treasury bill auction as the Auction Committee decided to fully award bids for the 91-day T-bill while partially awarding the 182- and 364-day T-bills,” the BTr said in a press release on Monday.

A trader said in a text message that the partial award did not come as a surprise as investors wanted higher returns for the longer tenors ahead of the BSP’s policy meeting this week, where it is expected to hike rates aggressively.

“The T-bill auction average yields continued to go up week on week ahead of the widely expected local policy rate hike on Thursday. The Treasury continued to make partial awards due to high bid yields,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

“The latest increase in T-bill auction yields may have been tempered by the stronger peso exchange rate recently. Stronger-than-expected Philippine GDP (gross domestic product) data could still support local policy rate hikes, signaled to match any future Fed rate hikes,” Mr. Ricafort added in a text message.

BSP Governor Felipe M. Medalla last week said the Monetary Board will likely hike benchmark interest rates by 75 bps on Thursday to match the Fed’s latest move as it seeks to stabilize prices and support the peso.

The BSP has raised borrowing costs by 225 bps since May, bringing the policy rate to 4.25%, in a bid to rein in inflation.

Meanwhile, the Fed increased rates by 75 bps for a fourth straight time this month, bringing cumulative hikes since March to 375 bps. The federal funds rate now stands a range between 3.75% and 4%.

Expectations of an aggressive move from the BSP this week were bolstered by latest inflation and GDP data.

Philippine headline inflation surged to 7.7% in October, its quickest pace in almost 14 years, from 6.9% in September and 4% in October 2021.

For the first 10 months, inflation averaged 5.4%, still lower than the BSP’s 5.6% full-year forecast but higher than its 2-4% target.

Meanwhile, the economy expanded by 7.6% in the third quarter, slightly faster than the revised 7.5% growth in the preceding three-month period and 7% a year earlier. In the nine months to September, GDP growth averaged 7.7%.

On Tuesday, the BTr will auction off P35 billion in reissued 25-year Treasury bonds (T-bonds) with a remaining life of 11 years and 11 months.

The Treasury wants to raise P215 billion from the domestic market this month, or P75 billion through T-bills and P140 billion via T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at P1.65 trillion this year, equivalent to 7.6% of gross domestic product. — L.M.J.C. Jocson

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