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Gov’t partially awards T-bill offer as rates climb on tightening bets

THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday as the market digested the recent tightening move of the Bangko Sentral ng Pilipinas (BSP) and the possibility of another rate hike by the US Federal Reserve.

The Bureau of the Treasury (BTr) raised just P10.55 billion from the T-bills it auctioned off on Monday versus the programmed P15 billion, even as bids reached P29.452 billion.

Broken down, the Treasury borrowed P5 billion as planned via the 91-day securities on Monday, with tenders for the tenor reaching P17.371 billion. The average rate of the tenor went down by 8.9 basis points (bps) to 4.375% from the 4.464% fetched last week, with accepted rates ranging from 4.14% to 4.513%.

Meanwhile, the government raised just P3.25 billion from the 182-day T-bills, even as bids hit P7.11 billion, above the P5-billion program. The six-month paper fetched an average rate of 4.921%, up by 8.3 bps from the 4.838% quoted for last week’s partial award, with the Treasury accepting offers with yields from 4.88% to 4.95%.

Lastly, the BTr awarded only P2.3 billion in 364-day debt papers, with demand reaching just P4.971 billion, lower than the P5 billion on the auction block. The average rate of the one-year paper rose by 4.2 bps to 5.142% from 5.1% last week. Accepted rates ranged from 5.125% to 5.15%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 4.1205%, 4.8101%, and 5.0535%, respectively, based on the PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“Results were mixed in today’s Treasury bill auction as the Auction Committee decided to fully award bids for the 91-day T-bill while partially awarding the 182- and 364-day T-bills… The auction was nearly twice oversubscribed, attracting P29.4 billion in total tenders,” the BTr said in a press release on Monday.

A trader said in a text message that the T-bill yields were mixed as rates are “still trying to settle at fair values in the wake of tighter monetary policy and an elevated inflation backdrop.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the partial awarding was partly due to higher bid yields following the BSP’s latest rate hike.

“T-bill average auction yields were mostly slightly higher after the widely expected local policy rate hike and higher inflation estimates,” he said in a text message.

Mr. Ricafort added that the market was also pricing in another Fed hike in December.

The BSP on Thursday fired off a 75-bp rate hike to match the Fed’s latest move and tame inflation.

The Philippine central bank has raised rates by a total of 300 bps so far this year. Its last meeting for the year is scheduled on Dec. 15.

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 BSP’s 2-4% target.

At its meeting last week, the central bank also raised its average inflation forecast for this year to 5.8%, from 5.4%. For next year, inflation is now seen averaging 4.3%, up from 4.1% previously.

Meanwhile, investors are looking for signals on Fed’s next move, with the market expecting a less aggressive 50-bp hike at their Dec. 13-14 meeting following four consecutive 75-bp increases.

The US central bank has raised rates by 375 bps since March.

On Tuesday, the BTr will auction off P35 billion in fresh 20-year Treasury bonds (T-bonds) with a remaining life of 11 years and 11 months.

The Treasury wants to raise P215 billion from the domestic market this month, or P75 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. — Luisa Maria Jacinta C. Jocson

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