Treasury bills fetch slightly higher rates

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday at slightly higher rates amid renewed inflation worries.

The Bureau of the Treasury (BTr) raised P20 billion as planned from the T-bills it auctioned off on Monday as total bids reached P59.425 billion, almost thrice as much as the amount on offer but lower than the P69.87 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 P23.165 billion. The three-month paper was quoted at an average rate of 5.605%, unchanged from last week, with accepted offers carrying yields ranging from 5.59% to 5.62%.

The government also made a full P6.5-billion award of the 182-day securities, with bids reaching P14.615 billion. The average rate of the six-month T-bill stood at 5.752%, up by 1.7 basis points (bps) from the 5.735% fetched last week, with accepted bid yields at 5.735% to 5.764%

Lastly, the Treasury raised P7 billion as planned via the 364-day debt papers as demand for the tenor totaled P21.645 billion. The average rate of the one-year debt inched up by 0.4 bp to 5.79% from the 5.786% quoted last week, with accepted rates ranging from 5.775% to 5.8%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.5078%, 5.7651%, and 5.7367%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The higher awarded T-bill rates today reflected domestic inflationary concerns from the recent typhoons and the peso depreciation,” a trader said in an e-mail on Monday.

Philippine headline inflation picked up to 2.3% in October from 1.9% in September, the government reported last week.

Still, the October consumer price index (CPI) was slower than the 4.9% print in the same month a year ago.

This was also within the Bangko Sentral ng Pilipinas’ (BSP) 2%-2.8% forecast for the month and was slightly below the 2.4% median estimate in a BusinessWorld poll of 11 analysts.

For the first 10 months, the CPI averaged 3.3%, within the BSP’s 2-4% target and slightly above its 3.1% forecast for the year.

A report by the National Disaster Risk Reduction and Management Council last week showed that Severe Tropical Storm Kristine and Typhoon Leon caused P5.9 billion worth of damage to agriculture.

Typhoon Marce hit parts North Luzon last week. Typhoon Nika made landfall on Monday, also affecting Northern Luzon.

The Philippine Atmospheric, Geophysical and Astronomical Services Administration is monitoring two more tropical cyclones outside the Philippine Area of Responsibility, with one expected to enter the country this week.

Meanwhile, the peso has been trading at the P58 level against the dollar since late October, hitting multi-month lows.

T-bill rates also rose amid expectations that the US Federal Reserve will be cautious in its easing cycle, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“A Trump US presidency could lead to fewer Fed rate cuts due to possible protectionist policies that could lead to higher import tariffs due to trade wars especially with China and other countries, higher wage inflation on tighter immigration rules, all of which would lead to higher overall US inflation,” Mr. Ricafort said.

The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday as its policy makers began taking stock of what could become a more complex economic landscape when President-elect Donald J. Trump takes office next year, Reuters reported.

Fed Chair Jerome H. Powell said the results of Tuesday’s presidential election, which paved the way for a US chief executive who has pledged widespread deportation of immigrants, broad-based tariffs, and tax cuts, would have no “near-term” impact on US monetary policy.

Mr. Powell said the Fed will continue assessing data to determine the “pace and destination” of interest rates as officials reset currently tight monetary policy to account for inflation that has slowed markedly in the past year and is nearing the US central bank’s 2% target.

But as the new administration’s proposals take shape, the Fed chief said the central bank would begin estimating the impact on its twin goals of stable inflation and maximum employment.

“It’s a process that takes some time,” said Mr. Powell, who spoke in a press conference following the Fed’s decision to reduce its benchmark overnight interest rate to the 4.5%-4.75% range. “It’s all of the policy changes that are happening. What’s the net effect? The overall effect on the economy at a given time? That’s a process… we go through all the time with every administration.”

Mr. Powell said for now the economic outlook was solid and the Fed hoped to keep it that way.

On Tuesday, the government will offer P15 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 19 years and six months.

The Treasury is looking to borrow P90 billion from the domestic market this month, or P60 billion via T-bills and P30 billion through T-bonds.

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