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Gov’t partially awards T-bills as rates rise

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THE GOVERNMENT made a partial award of the Treasury bills (T-bill) on offer yesterday as investors priced in the slower-than-expected inflation print for last month.

The Bureau of the Treasury borrowed just P13.548 billion from the T-bills it offered on Monday out of the P15 billion it intended to borrow.

This, even as the offer was oversubscribed, with total tenders amounting to P20.1 billion, higher than the P17.1 billion offered by banks and other financial institutions a week ago.

Broken down, the Treasury fully awarded the 91-day papers yesterday after rejecting all bids for three consecutive auctions. Total offers reached P6.086 billion, higher than the P4 billion it wanted to raise.

The average rate stood at 4.404%, 85.5 basis points (bps) higher than the 3.549% fetched during the previous auction.

On the other hand, the government partially awarded the 182-day T-bills, accepting offers totalling P3.548 billion out of the planned P5 billion. Total demand was at P5.898 billion, fetching an average yield of 5.684%, 47.8 bps higher than the 5.206% registered last week.

For the 364-day papers, the Treasury borrowed P6 billion as planned out of the P8.102 billion worth of tenders it received. The average yield likewise climbed 23.5 bps to 5.883% from last week’s 5.648%.

At the secondary market prior to the action, the three- and six-month papers were quoted at 4.7818% and 5.4614%, respectively, while one-year securities fetched a 5.9839% yield.

At the close of the trading, the 91-day, 182-day and 364-day papers fetched 4.7975%, 5.4626% and 5.6878%, respectively.

After the auction, National Treasurer Rosalia V. De Leon said investors priced in the slower-than-expected September inflation print.

“After the print of September at 6.7% [which is] lower than the consensus print for September, they are indicating that most probably inflation has reached its peak and [it will] ease for the next months,” Ms. De Leon told reporters Monday.

Prices of basic goods rose by 6.7% in September from a year ago, marking a fresh nine-year high, although a tad slower than the 6.8% median in a BusinessWorld poll.

Both the central bank as well as the government’s economic team are of the view that inflation has already peaked and will clock in slower during the last three months of the year.

“Because they are also seeing…that inflation must have reached its peak last September, there is no reason for them to be asking for high bids,” Ms. De Leon said. “It would be on a downward trajectory.”

She added that the Treasury made a partial award of the six-month papers to temper the increase in yields on the paper.

“If we award in full, then the rates will really be going up so much so we just tempered it,” Ms. De Leon noted.

Meanwhile, a bond trader said the outcome of the auction came a surprise as the Treasury accepted bids which were much higher than market expectations.

“Possibly due to their borrowing requirements because for the past few auctions, they already rejected,” the trader said in a phone interview. “They were forced to accept because they also need the funds.”

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.

Meanwhile, a retail Treasury bond (RTB) offer continues “to be in the menu” of the government for fund-raising in the fourth quarter as they are still looking at the liquidity.

“We will have to see how the next auctions [will perform], particularly the five-year bond,” she said.

Ms. De Leon added that the bond auction today “would be a good indication of market sentiments” as the five-year tenor is “at least in the intermediary part of the curve.”

Aside from this, the Treasury is also “readying the system” for the Marawi bond issue, which is eyed to raise P50-60 billion to fund the rehabilitation of the war-torn city, according to the Task Force Bangon Marawi last month. — Karl Angelo N. Vidal