THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday as yields sought by investors remained high ahead of the release of November inflation data.
The Bureau of the Treasury (BTr) raised only P9.62 billion from the T-bills it auctioned off on Monday, lower than the programmed P15 billion, even as bids reached P35.787 billion.
Broken down, the Treasury raised P5 billion as planned via the 91-day securities on Monday, with tenders reaching P25.987 billion. The average rate of the tenor went down by 17 basis points (bps) to 4.205% from the 4.375% fetched last week, with accepted rates ranging from 4.14% to 4.248%.
Meanwhile, the government awarded just P2.1 billion in 182-day T-bills, even as bids hit P5.78 billion, above the P5-billion program. The six-month paper fetched an average rate of 4.92%, inching down by 0.1 bp from the 4.921% quoted for last week’s partial award. Accepted rates were all at 4.92%.
Lastly, the BTr borrowed only P2.52 billion via the 364-day debt papers, with demand reaching just P4.02 billion, lower than the P5 billion on the auction block. The average rate of the one-year paper inched up by 0.8 bp to 5.15% from 5.142% last week, with the Treasury only accepting offers with a yield of 5.15%.
At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 4.177%, 4.9237%, and 5.081%, respectively, based on the PHP Bloomberg Valuation Reference Rates data provided by the Treasury.
National Treasurer Rosalia V. de Leon said in a Viber message to reporters after the auction that the government made a partial award of its offer as the rates bid by investors were broadly aligned with secondary market yields and “the awarding provides a good supply to deploy short-term liquidity.”
A trader said in a text message that demand was concentrated on the 91-day T-bills as investors were cautious in anticipation of November inflation data.
The Philippine Statistics Authority is set to release November inflation data on Dec. 6.
Headline inflation in October accelerated 7.7%, its fastest pace in nearly 14 years, mainly driven by rising food costs.
For the first 10 months, inflation averaged 5.4%, well above the central bank’s 2-4% target but lower than its 5.6% full-year forecast.
The Bangko Sentral ng Pilipinas has raised borrowing costs by 300 bps since May to rein in rising prices. It is set to hold its last policy meeting this year on Dec. 15.
“The slightly healthy downward correction may also be attributed to global crude oil prices at new 11-month lows that may lead to more local oil price rollbacks, reduce inflationary pressures, and help ease overall inflation,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.
Oil futures slid on Monday as protests in top importer China over strict COVID-19 curbs fueled demand concerns, Reuters reported.
Brent crude and US West Texas Intermediate (WTI) crude hit 10-month lows last week, having posted three consecutive weekly declines. Brent ended the latest week down 4.6%, while WTI fell 4.7%.
Mr. Ricafort noted that investors were also pricing in dovish signals from the US Federal Reserve.
Minutes of the Fed’s policy meeting this month where they delivered a fourth straight 75-bp hike showed majority of policy makers agreed it would soon be appropriate to slow the pace of tightening.
The market is now expecting a less aggressive 50-bp hike at the Fed’s Dec. 13-14 meeting following four consecutive 75-bp increases. The US central bank has raised rates by 375 bps since March to cool elevated inflation.
The T-bill auction on Monday was the last offering under the BTr’s November borrowing plan. Out of its P215-billion program for the month, it raised just P128.707 billion via T-bills and Treasury bonds (T-bonds).
On Tuesday, the BTr will auction off P35 billion in reissued 20-year T-bonds with a remaining life of four years and nine months.
The Treasury wants to raise P135 billion from the domestic market in December, or P30 billion through T-bills and P105 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