Gov’t makes full award of T-bills

THE GOVERNMENT made a full award of the Treasury bills (Tbills) it auctioned off on Monday even as rates climbed across all tenors as some investors believe inflation has already peaked.

The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction yesterday. The offer was oversubscribed as demand from investors totaled P24.51 billion, higher than the P17.861 billion recorded at last week’s offering.

Broken down, the government borrowed P4 billion as planned via the 91-day tenor yesterday as tenders amounted to P7.317 billion. The average rate for the papers climbed 54.8 basis points (bps) to 4.952% from the 4.404% logged in the auction last Oct. 8 and following the full rejection the Treasury made for the tenor last week.

For the 182-day T-bills, the Treasury borrowed the programmed P5 billion out of the P7.343 billion offered by banks and other financial institutions. The average yield likewise rose by 16.5 bps to 6.059% from the 5.894% quoted in the previous offering.

The government also made a full award of the 364-day papers, accepting the programmed P6 billion out of total offers amounting to P9.85 billion. Its average yield likewise increased 23.3 bps to 6.489% from last week’s 6.256%.

At the secondary market prior to the auction, the three-month and six-month papers were quoted at 4.9089% and 5.9036%, respectively, while one-year securities fetched a 6.5607% yield.

At the close of trading, the rates of the 91-day and 182-day securities climbed to 4.9286% and 6.0142%, respectively, while the 364-day T-bills rallied to fetch a lower yield of 6.2177%.

Deputy Treasurer Erwin D. Sta. Ana said the BTr fully awarded the T-bills as it saw a “good turnout” in terms of the total offers from investors.

“We saw some correction on the 91-day [papers] because if you compare the rates from the previous fully rejected auction, it’s a little bit lower than last week,”

Mr. Sta. Ana told reporters yesterday, adding the Treasury also saw “quite reasonable increments” in yields for the 182- and 364-day papers.

Had the government made a full award of the threemonth T-bills last week, the papers would have fetched a 5.067% average rate, higher than the 4.952% yield yesterday.

“We are thinking there is still reasonable liquidity going on, so the dealers are just waiting for some updated information on whether they should come into the auction or wait for a little bit more time,” Mr. Sta. Ana said.

“It is also an indication that some view it as inflation peaking already so it is a good sign.”

During its policy setting meeting on Sept. 27, the Bangko Sentral ng Pilipinas (BSP) said it expects inflation to have peaked last quarter, while supply shocks due to typhoon Ompong should be limited “to just a few months.”

BSP officer-in-charge Deputy Governor Maria Almansara Cyd N. Tuaño-Amador also said on Friday that inflation could “reverse more quickly” to below four percent next year supported by the central bank’s recent policy tightening moves as well as other measures implemented by the government to temper the pace of price increases.

Inflation surged to a fresh nine-year high of 6.7% in September, which brought the year-to-date average to 5%, well above the 2-4% initial target of the government. Last week, the multi-agency Development Budget Coordination Committee raised its 2018 inflation forecast to 4.8-5.2% from 4-4.5% previously.

The monetary authority has raised interest rates by a total of 150 bps since May to arrest inflation and price increase expectations.

Meanwhile, a bond trader said the auction result yesterday was within market expectations.

“Given that the rates were quite high, it was really attractive for investors at this point, so demand was strong for the short end,” the trader said in a phone interview yesterday, adding that the recent strength of the peso was also factored in by the market.

The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in Treasury bonds.

DOLLAR BONDS ON TRACK

Meanwhile, the Treasury said it is “still on track” with its dollar-denominated global bond offering.

“We are still on schedule as far as the US dollar offering is concerned,” Mr. Sta. Ana said.

Officials from various government agencies, including the BSP and the Treasury, are in the United States for a non-deal road show to “update” investors regarding the Philippine economy.

Aside from this, the government is also looking at offering retail Treasury bonds with a three- or five-year tenor this quarter or in the first three months of 2019.

“We are looking at the market conditions and where interest rates will be heading based on the inflation print,” Mr. Sta. Ana added.