Inflation expectations prompt eased rates for T-bills

By Jasper Emmanuel Y. Arcalas @jearcalas

INVESTORS asking rates for short-term government securities further eased on Monday on anticipated tepid inflation print, allowing the Bureau of the Treasury (BTr) to raise the full P15 billion from the tender of Treasury bills (T-bills).

The latest auction marked the third consecutive T-bills tender wherein the Treasury made a full award as investors eye a further slowdown in the country’s inflation rate for June.

“Most Treasury-bill auction yields mostly continued to decline week-onweek, similar to the week-on-week decline on comparable short-term PHP BVAL yields, ahead of the latest Philippine inflation rate that is expected to ease further in the coming months due to higher base/denominator effects,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The average rates for the T-bills on Monday auction settled at the following levels: 5.224 percent for the 90-day tenor, 5.789 percent for the 182-day, and 6.210 percent for the 364-day debt paper.

The average yield for the 90-day T-bills was lower than its secondary market benchmark level of 5.7 percent and declined by 38.7 basis points from previous week’s 5.611 percent.

The debt paper fetched rates between 5.123 percent and 5.34 percent. The 182-day T-bills, meanwhile, had an average rate of 5.789 percent. It was lower than the previous week’s 5.823 percent and the prevailing benchmark of 5.935 percent. Asking rates for the government security ranged from 5.546 percent to 5.83 percent, all below the secondary market benchmark level.

However, the 364-day T-bills saw a slight uptick in yield as it averaged at 6.21 percent versus last week’s 6.184 percent. It was also slightly higher than the 6.119 percent peg by the secondary market.

Nonetheless, Monday’s auction was the fourth consecutive T-bills auction that saw yields relatively easing across all tenors.

“The total tenders reached P45.1 billion, thrice the P15 billion offering,” the Treasury said.

Offers for the 90-day T-bills reached P20.867 billion while the 182-day and 364-day tenors fetched P13.309 billion and P10.927 billion, respectively in offers, according to the Treasury data.

Easing yield

RICAFORT said investors’ bids for both the T-bills and the Treasury bonds could sustain its downward trend this month because of better market conditions.

For one, Ricafort pointed out that both the inflation print in the Philippines and in the United States are on track to meet their respective target ranges in the succeeding months.

Furthermore, the “relatively” stronger peso exchange rate against the US dollar would support lowering of import costs and overall inflation that would “reduce” the “need” for policy rate hikes which in turn “would support lower upcoming auction yields,” he explained.

Ricafort also cited the possible reinvestment in the domestic markets of some P141-billion 10-year T-bonds that are set to mature on August 15.

He noted that the national government’s domestic borrowing program of P225 billion for August is higher than July’s P180 billion target due to “larger maturities of government bonds” in August.

“Some of these government bond maturities would be reinvested in the markets, thereby could support any further downward correction in the local bond yields,” he said.

“Thus, the said government bond maturities would also support higher demand for the upcoming Treasury bill and Treasury bond auctions, thereby leading to further easing of the upcoming auction yields for the month,” he added.

Monday’s auction was the first tender of the government for its August borrowing program.