Gov’t fully awards T-bill offer as rates drop across all tenors

THE GOVERNMENT fully awarded the Treasury bills (T-bills) it auctioned off on Monday as rates went down across all tenors amid strong demand from the market.

The Bureau of the Treasury (BTr) raised P15 billion as planned from the T-bills it auctioned off on Monday as bids reached P62.12 billion, more than four times the amount on offer.

Broken down, the Treasury borrowed P5 billion as programmed via the 91-day T-bills, with tenders reaching P16.58 billion. The average rate of the three-month papers dropped by 8.1 basis points (bps) to 4.152% from the 4.211% quoted for the tenor last week, with accepted rates ranging from 4.13% to 4.163%.

The government also made a full P5-billion award of the 182-day securities as bids reached P17 billion. The six-month tenor was quoted at an average rate of 4.875%, declining by 3.7 bps from the 4.912% seen the previous week, with accepted rates from 4.858% to 4.888%.

Lastly, the BTr raised P5 billion as planned from the 364-day debt papers as demand for the tenor reached P28.27 billion. The average rate of the one-year T-bill stood at 5.354%, 7.4 bps lower than the 5.428% fetched for the tenor last week. Accepted yields were from 5.33% to 5.367%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 4.3757%, 4.9535%, and 5.3947%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.

“Strong demand lowered rates, resulting in a full award across all tenors for the T-bill offering today,” National Treasurer Rosalia V. de Leon said in a Viber message to reporters after Monday’s auction.

Meanwhile, a trader said in a Viber message that T-bill yields followed “the general downtrend of bonds as of late.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also said that T-bill rates dropped “similar to the recent downward correction in the comparable short-term PHP BVAL yields.”

Mr. Ricafort added that the market also priced in expectations of a 25-bp rate hike from the US Federal Reserve at its Jan. 31 to Feb. 1 meeting amid easing inflation, which could be matched by the Bangko Sentral ng Pilipinas (BSP) in its own review on Feb. 16.

Data on Friday showed that US consumer spending fell in December, while inflation continued to subside, which could give the Fed room to further slow the pace of its rate hikes, Reuters reported.

Consumer spending, which accounts for more than two-thirds of US economic activity, dropped 0.2% last month. Data for November was revised lower to show spending slipping 0.1% instead of gaining 0.1% as previously reported.

Meanwhile, the personal consumption expenditures (PCE) price index edged up 0.1% last month after rising by the same margin in November. In the 12 months through December, the PCE price index increased 5%.

The US central bank raised its fed funds rate by 50 bps in December to a 4.25%-4.5% range following four straight 75-bp increases, bringing total hikes for 2022 to 425 bps.

Meanwhile, the BSP hiked borrowing costs by 350 bps in 2022 to bring down rising prices, with its key rate now at 5.5%.

BSP Governor Felipe M. Medalla said earlier this month that the central bank is likely to raise benchmark rates by 25 or 50 bps at its meeting as it still needs to anchor inflation expectations.

Mr. Medalla has also said the BSP will likely end its tightening cycle with one or two more increases this quarter, which will bring its key rate to around 6%.

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

The BTr wants to raise P200 billion from the domestic market this month, or P60 billion via T-bills and P140 billion via T-bonds.

The government borrows from domestic and external sources to fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — Aaron Michael C. Sy with Reuters