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Gov’t makes full award of T-bills as rates decline on inflation bets

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By Karl Angelo N. Vidal, Reporter

THE GOVERNMENT made a full award of the Treasury bills it offered yesterday, with rates declining across all tenors as investors expect inflation to continue its downward trajectory, fuelling bets of monetary policy easing.

The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction Monday. The offer was oversubscribed by more than three times as bids from investors soared to P51.2 billion.

Broken down, the Treasury accepted P4 billion as planned for the 91-day papers out of the P15.724 billion offered by banks and other financial institutions. The average rate declined 12.5 basis points (bp) to 5.438% from the 5.563% quoted in the previous offer.

The government also made a full award of the 182-day debt notes it placed on the auction block, borrowing P5 billion as planned versus total offers amounting to P14.893 billion. The average yield also slipped 15.3 bps to 5.825% from last week’s 5.948%.

The Treasury likewise fully awarded the 364-day T-bills, accepting P6 billion out of the total bids worth P20.565 billion. Its average yield went down by 10.8 bps to 5.977% from the 6.085% tallied in the previous auction.

Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 5.683%, 5.931%, and 6.073% yesterday, respectively.

Following the auction, National Treasurer Rosalia V. De Leon said the rates of the T-bills went down across the board due to slower inflation expectations.

“I think (the rates declined) because of the inflation, the median is 3.1%,” Ms. De Leon told reporters yesterday.

Inflation likely eased further for a sixth straight month in April on the back of a decline in rice prices. A BusinessWorld poll of 10 economists yielded a 3.1% median estimate for last month, which if realized will be slower than the 3.3% rate logged in March.

Apart from this, Ms. De Leon also attributed the decline in rates to S&P Global Ratings’ upgrade of the Philippines’ long-term credit rating to “BBB+” from “BBB” last week.

“That also affected (the rates), but it’s really more that they really see inflation is trending downwards,” Ms. De Leon added.

Sought for demand, Robinsons Bank Corp. trader Kevin S. Palma said yields across all tenors came in lower than expected and even below than secondary market levels prior to the auction.

“Extremely strong demand was evident across the offering as market participants and investors alike continue to cheer the S&P upgrade as well as heightened speculation that the BSP (Bangko Sentral ng Pilipinas) may ease policy rates or reduce the reserve requirement ratio as soon as Thursday,” Mr. Palma said in a phone message.

BSP Governor Benjamin E. Diokno on Friday said he sees room to ease monetary policy at the Monetary Board’s review on Thursday, as the recent credit rating upgrade is “another factor” to “move faster.”

The government plans to borrow P315 billion from the domestic market this quarter, broken down into P195 billion in T-bills and P120 billion in Treasury bonds.

Meanwhile, National Treasurer Rosalia V. De Leon said the Treasury is looking at issuing euro-denominated bonds with a maturity in the “intermediate part of the curve,” after the government round up its investor meetings in Europe.

“During discussions with investors, that’s also their preference, so between seven to 10 years,” she said.

The government plans to issue “benchmark-sized” euro-denominated bonds — meaning at least $500 million (€446.94 million) in size — in a bid to diversify funding sources.

The Philippines hired banks late last month to arrange deal road shows in Zurich, London, Paris, Frankfurt and Milan starting April 26 to draw investor interest.

“(Starting now), we’ll have to just continue closely watching the market, and we’ll make the announcement once we are pulling the trigger,” she added.

Apart from its return to the euro debt market, the government is also preparing to raise 6 billion yuan from the issue of panda bonds, which will be its second such offering.

The government is looking to borrow P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of the country’s gross domestic product.

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