Gov’t makes partial award of T-bill offer

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THE GOVERNMENT partially awarded the Treasury bills (T-bills) it offered on Monday as investors asked for higher yields amid faster October inflation and an anticipated rate hike by the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury (BTr) raised just P6.7 billion via the T-bills it auctioned off on Monday even as total tenders reached P21.507 billion, higher than the P15-billion offer.

Broken down, the BTr borrowed just P2.1 billion through the 91-day T-bills, even with total bids reaching P9.35 billion, above the P5-billion program. The average rate of the tenor rose by 203.2 basis points (bps) to 4.35% from the 2.318% seen on Sept. 5, the last successful award, with the government only accepting offers with a 4.35% yield.

The Treasury also raised only P2.5 billion via the 182-day securities despite tenders reaching P7.457 billion versus the P5-billion plan. The average rate of the six-month T-bill went up by 84.2 bps to 4.8% from the 3.958% quoted for the last successful award on Sept. 26, with accepted rates ranging from 4.7-4.85%.

Lastly, the BTr awarded just P2.1 billion through the 364-day debt papers as demand for the tenor reached P4.7 billion, slightly lower than the P5 billion on the auction block. The average rate of the tenor increased by 121.8 bps to 5% from the 3.782% seen for the last successful award on Aug. 22. Accepted rates were all at 5%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 3.8559%, 4.5504%, and 4.8684%, respectively, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates data provided by the Treasury.

“The Auction Committee partially awarded bids for T-bills at today’s auction The auction was 1.4 times oversubscribed, attracting P21.507 billion in total tenders,” the BTr said in a press release on Monday.

National Treasurer Rosalia V. de Leon said in a Viber message that the Treasury hopes to make full awards in succeeding auctions amid less uncertainty in the market.

“Hopefully, we will be able to make full awards in succeeding bills auctions. More and clearer information will better guide market in submission of bids,” Ms. De Leon added.

Meanwhile, a trader said T-bill rates had to adjust higher in light of tighter monetary policies being implemented by central banks worldwide.

“Moreover, dealers and investors continued to ask for a higher risk premium as domestic inflation continues to run hot, bolstering expectations of higher interest in the months to come,” the trader added in a text message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message that the auction was mostly undersubscribed after the latest increase in inflation and with the BSP chief saying they will implement a large rate hike next week.

Headline inflation quickened to 7.7% in October, its fastest pace in almost 14 years or since the 7.8% seen in December 2008, or during the global financial crisis.

For the first 10 months, inflation averaged 5.4%, faster than 4% a year ago and the BSP’s 2-4% target. Still, this was lower than the central bank’s 5.6% forecast for the year.

BSP Governor Felipe M. Medalla last week said the Monetary Board will hike benchmark interest rates by 75 bps at its Nov. 17 meeting to keep in step with the US Federal Reserve as it seeks to stabilize prices. The central bank has raised rates by 225 bps since May.

The Fed delivered a fourth straight 75-bp rate hike last week to combat stubbornly high inflation, bringing total increases since March to 375 bps.

On Tuesday, the BTr will auction off P35 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 4 years and 10 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. — Luisa Maria Jacinta C. Jocson