THE GOVERNMENT fully awarded the Treasury bills (T-bills) it offered on Monday even as rates were higher across all tenors to track the continued upward correction in secondary market yields amid mixed expectations of further monetary easing here and in the United States.
The Bureau of the Treasury (BTr) raised P20 billion as planned from the T-bills it auctioned off on Monday as total bids reached P56.046 billion, almost thrice as much as the amount on offer and slightly higher than the P55.069 billion in tenders seen the previous week.
Broken down, the Treasury borrowed P6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P14.516 billion. The three-month paper was quoted at an average rate of 5.586%, 12.3 basis points (bps) higher than the 5.463% recorded last week, with bids ranging from 5.48% to 5.674%.
The government also made a full P6.5-billion award of the 182-day securities, with bids reaching P20.17 billion. The average rate of the six-month T-bill stood at 5.752%, up by 2.1 bps from the 5.731% fetched last week, with accepted bid yields at 5.74% to 5.764%
Lastly, the Treasury raised P7 billion as planned via the 364-day debt papers as demand for the tenor totaled P21.36 billion. The average rate of the one-year debt went up by 6.5 bps to 5.751% from the 5.686% quoted last week, with accepted rates ranging from 5.65% to 5.77%.
At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.1979%, 5.8013%, and 5.7292%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.
“Treasury bill average auction yields continued to correct higher for the fourth straight week, similar to the slight week-on-week increase in the comparable short-term PHP BVAL yields,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Yields rose as markets priced in the possibility of Republican candidate Donald J. Trump winning the Nov. 5 US presidential election, which could affect the direction of monetary policy in the world’s largest economy, Mr. Ricafort said.
A trader likewise said in a text message that T-bill yields were higher week-on-week as investors became cautious on their Fed rate cut bets, with the US central bank’s stance also likely to affect the Bangko Sentral ng Pilipinas (BSP) own easing cycle.
Benchmark US Treasury yields climbed to three-month highs last week, reflecting expectations of a potentially less dovish Federal Reserve as well as possibly increased spending under the next president, Reuters reported.
Bets on Mr. Trump prevailing have risen on prediction markets in recent weeks, with the Republican seen as backing policies including tariffs that could lead to higher inflation.
At 4.23%, benchmark 10-year Treasury yields are up 43 bps through October.
Markets price a 95% chance of a 25-bp US Federal Reserve rate cut at its Nov. 6-7 meeting. Odds for a bigger half-point cut were at 50% a month ago, according to CME’s FedWatch tool.
The Fed last month kicked off its policy easing cycle with a 50-bp reduction, which brought its target rate to the 4.75%-5% range.
Meanwhile, the BSP’s Monetary Board this month cut benchmark interest rates by 25 bps for a second straight meeting, bringing its policy rate to 6%. It has slashed borrowing costs by 50 bps so far this year after it began its rate-cut cycle in August.
BSP Governor Eli M. Remolona, Jr. has signaled the possibility of another 25-bp cut at the Monetary Board’s last meeting for the year on Dec. 19, which would bring the policy rate to 5.75% by end-2024.
T-bill rates were higher amid a weakening peso, which could affect inflation, Mr. Ricafort added. On Friday, the peso ended at a near three-month low of P58.32 per dollar.
Concerns over rising prices of goods due to the recent typhoon also drove yields up, the trader added.
Philippine headline inflation sharply slowed to 1.9% in September from 3.3% in August, marking the first time in over four years that the monthly consumer price index (CPI) was below 2%.
In the first nine months of the year, the CPI averaged 3.4%, within the BSP’s 2-4% full-year target.
Monday’s T-bill auction was the last one for the month. The government raised the programmed P100 billion via the short-term papers as it made full award of all its offerings.
On Tuesday, the BTr will offer P15 billion in reissued 10-year Treasury bonds with a remaining life of nine years and two months.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product this year. — A.M.C. Sy with Reuters
