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BTr partially awards T-bills as rates rise

THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday as investors wanted higher yields on expectations of elevated US inflation, which would prompt continued aggressive hikes from the US Federal Reserve.

The Bureau of the Treasury (BTr) raised just P5 billion from the T-bills it auctioned off on Monday, well below the P15-billion program, even as bids reached P19.481 billion, as it only awarded six-month papers.

The Treasury borrowed P5 billion as planned via the 182-day securities on Monday, with bids reaching P9.975 billion. The average rate of the tenor went up by 14.9 basis points (bps) to 3.634% from the 3.485% fetched last week. Accepted rates ranged from 3.498% to 3.8%.

Meanwhile, the government rejected all bids for 91-day T-bills on Monday, with tenders for the tenor at just P4.65 billion, below the P5-billion program. Had they been awarded, the average rate of the three-month paper would have gone up by 103.1 bps to 3.349% from the 2.318% fetched last week.

The BTr also refused to award 364-day debt papers, with demand only reaching P4.856 billion versus the P5 billion on the auction block. Had the government accepted all bids, the debt paper’s average rate would have climbed by 61 bps to 4.392% from 3.782% fetched for the tenor on Aug. 22, which was the last successful award.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 2.461%, 3.2%, and 3.977%, respectively, based on the PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

National Treasurer Rosalia V. de Leon told reporters in a Viber message after Monday’s auction that the government made a partial award as investors sought higher yields.

“Markets are on wait-and-see mode ahead of the release of US consumer price index (CPI) data for August but remain cautious, with continuous Fed statements on the need to be restrictive to finish the job and conquer inflation,” Ms. De Leon said.

The first trader said investors want increased returns as global central banks continue to hike rates.

“We are in the middle of a monetary tightening cycle and rates are still expected to trend higher in the coming months. Dealers and investors continue to price in this development — that’s why bids submitted are much too high versus expectations,” the first trader said.

The second trader said there was less demand for the T-bills as some papers in the secondary market offer higher yields for the same investment duration, citing the retail Treasury bond 5-11 maturing on Dec. 4, which is trading at 4.325%.

The August US CPI report will be released on Tuesday. In July, consumer inflation in the US slowed to 8.5% from an over 40-year high of 9.1% in June.

Fed Chair Jerome H. Powell on Thursday said the central bank is “strongly committed” to fighting inflation and needs to continue acting strongly to bring prices down.

The US central bank will meet to review policy on Sept. 20-21, where markets expect another aggressive hike. It has raised rates by 225 bps so far since March, including back-to-back 75-bp hikes in June and July.

At home, the Bangko Sentral ng Pilipinas (BSP) is also in the middle of tightening its policy settings to rein in rising inflation and has raised benchmark rates by 175 bps since May. The Monetary Board’s next meeting is on Sept. 22.

BSP Governor Felipe M. Medalla earlier said the central bank may need to respond if the Fed remains hawkish, as its spillover effects on the market, especially the peso, could affect prices.

Headline inflation eased to 6.3% in August from 6.4% in July. This brought the eight-month average to 4.9%, higher than the central bank’s 2-4% target but still below its 5.4% forecast for the year.

On Tuesday, the BTr will auction off P35 billion in fresh 10-year Treasury bonds (T-bonds).

The Treasury wants to raise P200 billion from the domestic market this month, or P60 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. — Diego Gabriel C. Robles

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