T-bills partially awarded at higher rates

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THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday as rates climbed across the board on expectations of further tightening by the Philippine central bank due to still-elevated inflation.

The Bureau of the Treasury (BTr) raised P14.75 billion from the T-bills it auctioned off on Monday, short of the P15-billion program, even as bids reached P27.995 billion or almost twice as much as the amount on offer.

Broken down, the Treasury raised P5 billion as planned via the 91-day T-bills with tenders reaching P11.875 billion, more than twice the programmed amount. The average rate of the three-month paper went up by 7.7 basis points (bps) to 4.232% from the 4.155% quoted for the tenor last week, with accepted rates ranging from 4.195% to 4.35%.

The government also made a full P5-billion award of the 182-day securities as bids for the paper reached P9.18 billion. The six-month paper was quoted at an average rate of 4.959%, up by 5.6 bps from the 4.903% seen in the previous week, with accepted rates ranging from 4.85% to 4.959%.

Meanwhile, the BTr raised just P4.75 billion from the 364-day debt papers despite demand reaching P6.94 billion, above the P5 billion on the auction block. The average rate of the one-year T-bill rose to 5.393%, 15.3 bps higher than the 5.24% fetched for the tenor last week. Accepted yields ranged from 5.5% to 5.325%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 4.2673%, 4.874%, and 5.2682%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

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

A trader said in a Viber message that the government made a partial award of its T-bill offer as rates climbed across all tenors as inflation remained well above target last month.

“Treasury bill auction yields were again higher week on week … after the latest inflation data was at a new 14-year high of 8.1% in December 2022, which could still justify further local policy rate hikes, which could follow any further hike in Federal Reserve rates on Feb. 1,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

Headline inflation quickened to 8.1% in December from 8% in November and 3.1% in December 2021. This was the fastest since the 9.1% print in November 2008.

This was below the 8.3% median estimate in a BusinessWorld poll of 11 analysts and within the 7.8-8.6% estimate given by the Bangko Sentral ng Pilipinas (BSP) for the month.

Full-year inflation averaged 5.8%, matching the BSP’s forecast but faster than its 2-4% annual target and the 3.9% average posted in 2021.

The BSP has said it will likely need to continue raising rates this year as inflation is expected to remain above its 2-4% target in the first semester.

In 2022, it hiked borrowing costs by 350 bps, bringing its policy rate to 5.5%.

Meanwhile, the Fed last year hiked its fed funds rate by 425 bps to a 4.25%-4.5% range and is likewise expected to continue tightening, albeit at a slower pace, to bring down elevated inflation.

The Fed’s first meeting for this year is on Jan. 31 to Feb. 1, while the BSP Monetary Board will hold its own review on Feb. 16.

On Tuesday, the BTr will offer P35 billion in reissued 25-year Treasury bonds (T-bonds) with a remaining life of 12 years and eight months.

The Treasury wants to raise P200 billion from the domestic market in January, or P60 billion through T-bills and P140 billion via T-bonds.

The government borrows from domestic and external sources to finance its budget deficit, which is expected to reach P1.47 trillion this year or 6.1% of gross domestic product. — A.M.C. Sy