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Gov’t hikes T-bill award as rates continue to drop

THE GOVERNMENT hiked the volume of the Treasury bills (T-bills) it awarded for the sixth straight week on Monday as rates continued to decline across the board.

The Bureau of the Treasury (BTr) borrowed P24 billion via the T-bills on Monday, higher than its initial plan to raise P20 billion, after it accepted more non-competitive bids for the three-month and six-month papers.

Total tenders reached P95.35 billion, making Monday’s offering nearly five times oversubscribed. However, this was smaller compared with the P103.65 billion in bids seen during last week’s auction.

Broken down, the BTr raised P7 billion via the 91-day T-bills, more than the P5-billion program, as tenders hit P21.6 billion. The three-month papers fetched an average rate of 0.846%, down by 7.1 basis points (bps) from the 0.917% seen last week.

The government also borrowed P7 billion from the 182-day papers versus the P5-billion plan, with bids reaching P29.834 billion. The average rate of the six-month papers went down by 11.6 bps to 1.094% on Monday from the previous week’s 1.21%.

Lastly, the Treasury made a full P10-billion award of the 364-day securities on the auction block out of total tenders worth P43.915 billion. The one-year instruments were quoted at an average yield of 1.446%, down 4.6 bps from the 1.492% fetched at the previous offering.

National Treasurer Rosalia V. de Leon said the T-bills auction was met with strong demand despite the spike in January inflation as the market continues to be flooded with cash.

“Liquidity remains strong with P20-billion maturity this week. Price pressures [are] seen as temporary and will be alleviated with measures like price caps and food imports,” Ms. De Leon told reporters via Viber after the auction on Monday.

A bond trader said market players are choosing to put their excess cash in these short-term securities.

“It’s just that funds have nowhere to go, especially for those with limits on tenor,” the trader said in a Viber message.

Headline inflation quickened for the fourth straight month to a two-year record in January after food and transport costs spiked, the Philippine Statistics Authority reported on Friday

Inflation climbed to 4.2% last month, faster than the 3.5% in December and 2.9% a year earlier. It was also the fastest since the 4.4% seen in January 2019.

The January print exceeded the Bangko Sentral ng Pilipinas’ (BSP) estimate of 3.3-4.1% for the month and its 2-4% annual target.

BSP Governor Benjamin E. Diokno has said this spike in prices will be temporary and is not likely to require policy action. The Monetary Board will meet on Thursday for its first policy meeting for 2021.

Meanwhile, the Treasury will hold on Tuesday the rate-setting auction for the three-year retail Treasury bonds (RTBs) as it looks to raise at least P30 billion. It will offer the bonds in denominations of P5,000 from Feb. 9 to March 4, unless ended earlier.

The government offers RTBs to encourage small retail investors to invest, as these have higher returns than prevailing market rates.

The BTr plans to borrow P110 billion from the local debt market this month: P80 billion via weekly auctions of T-bills and P30 billion from a Treasury bond offer. It canceled a previously scheduled bond auction for its RTB offering.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — B.M. Laforga

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