THE GOVERNMENT made a full award of the Treasury bills (T-bill) it offered on Monday amid “decent” demand and at average rates still mostly below secondary market levels even as yields corrected higher following five straight weeks of decline.
The Bureau of the Treasury (BTr) raised P22 billion as planned from the T-bills it auctioned off on Monday as total bids reached P50.113 billion, more than twice the amount on offer but lower than the P70.649 billion in tenders seen on Feb. 3.
Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as tenders for the tenor reached P19.238 billion. The three-month paper was quoted at an average rate of 5.128%, rising by 2.7 basis points (bps) from the 5.101% seen at the previous auction, with accepted rates ranging from 5.10% to 5.148%.
The government also made a full P7-billion award of the 182-day securities as bids stood at P14.95 billion. The average rate of the six-month T-bill stood at 5.562%, 8.5 bps higher than the 5.477% fetched the previous week. Tenders accepted by the BTr carried rates of 5.5% to 5.59%.
Lastly, the Treasury raised P8 billion as planned via the 364-day debt papers as demand for the tenor totaled P15.925 billion. The average rate of the one-year debt increased by 5.5 bps to 5.726% from 5.671% previously, with bids accepted having rates of 5.69% to 5.765%.
At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.1697%, 5.4959%, and 5.7201%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.
The BTr made a full award of its Treasury bill offering as it saw “still decent demand,” a trader said in a text message.
T-bill yields rose as “headlines over the weekend, including better US jobs data, suggest slower rates cuts for the US Federal Reserve,” the trader said.
“But the higher rates looked more like a correction from the aggressive drop seen in the last few weeks,” the trader added. “Note that the rates for the 91- and 182-day T-bills are still lower than the current and the projected Bangko Sentral ng Pilipinas (BSP) policy rate after Thursday.”
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message that T-bill yields corrected slightly higher after declining for five straight weeks due to bets of slower Fed easing amid uncertainties over the Trump administration’s policies, but remained mostly lower than comparable short-term BVAL yields ahead of a widely expected BSP cut on Thursday.
Demand for the T-bill offer was slightly weaker as market interest is now starting to shift to long-term debt for higher returns, Mr. Ricafort added.
Federal Reserve officials on Friday said the US job market is solid and noted the lack of clarity over how US President Donald J. Trump’s policies will affect economic growth and still-elevated inflation, underscoring their no-rush approach to interest rate cuts, Reuters reported.
On Friday the Labor department reported a 4% unemployment rate last month and the addition of 143,000 jobs, a picture “consistent with a healthy labor market that is neither weakening nor showing signs of overheating,” Federal Reserve Governor Adriana Kugler said in Miami, Florida.
At the same time, she said, there is “considerable uncertainty” about the economic impact of new policy proposals, and “recent progress on inflation has been slow and uneven, and inflation remains elevated.”
US inflation by the Fed’s targeted measure, the 12-month change in the personal consumption expenditures price index, ticked up toward the end of last year, measuring 2.6% in December. The Fed’s target is 2%.
Rate-futures traders bet the Fed would end up cutting rates just once this year, with a rising risk that it would wait to do so until the second half of the year.
“We don’t need to be in a hurry” is how Fed Chair Jerome H. Powell characterized the rate-path outlook last month after the US central bank opted to hold short-term US borrowing costs steady in the 4.25%-4.50% range.
Meanwhile, a BusinessWorld poll conducted last week showed that 19 out of 20 analysts expect the BSP’s policy-setting Monetary Board to reduce the target reverse repurchase rate by 25 bps at its meeting on Feb. 13 (Thursday).
This would mark the BSP’s fourth straight 25-bp cut since August and would bring the policy rate to 5.5% from 5.75% currently.
BSP Governor Eli M. Remolona, Jr. previously said that a rate cut is “on the table” at this week’s policy meeting. He said they may slash benchmark interest rates by 50 bps this year as “policy insurance” against risks, with the cuts likely to be done in 25-bp increments each in the first and second half.
On Tuesday, the BTr will offer P30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of seven years and seven months.
The Treasury is looking to raise P203 billion from the domestic market this month, or P88 billion from T-bills and P115 billion from T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy with Reuters
