T-BILL RATES RISE ON LOWER INFLATION EXPECTATIONS

Reacting to lower inflation projections, Philippines’ Treasury bill (T-bills) rates rose across the board on Monday, with the auction committee awarding in full the 91-day paper after three consecutive weeks of rejection.

The rate of the bellwether 91-day T-bill rose to 4.404 percent from 3.549 percent during the auction last September 10.

The Bureau of Treasury (BTr) offered the debt paper for PHP4 billion and tenders reached PHP6.086 billion.

The average rate of the 182-day paper rose to 5.684 percent from 5.206 percent during the auction last October 1.

It was offered for PHP5 billion but was partially awarded for PHP3.548 billion even as tenders reached PHP5.898 billion.

The rate of the one-year T-bill averaged at 5.883 percent, higher than the 5.648 percent last week.

BTr made a full award of PHP6 billion while tenders amounted to PHP8.102 billion.

National Treasurer Rosalia de Leon said the auction committee awarded in full the 91-day T-bill because the spike in rates asked by banks are acceptable compared to the previous weeks.

She attributed this development to the 6.7 percent inflation rate last September, which is lower than the consensus projection of 6.8 percent.

Amid the lower-than-expected inflation rate in the ninth month this year, it is higher than the 6.4 percent last August.

De Leon said market players are heeding the government position that inflation will peak in the third quarter and then return to the two to four percent target band by next year.

“Because they are also seeing (deceleration of inflation) given the (latest) print and the indications that inflation must have reached its peak last September so there is no reason for them to be asking for high bids,” she said, citing that “it would be on a downward trajectory.”

With interest rate seen to normalize in the coming months, de Leon said they are open to the issuance of retail treasury bond (RTB).

“We`ll see depending on liquidity,” she said, noting that this is among their options.

The National Treasurer said they will be considering their options based on, among others, the result of the auction for five-year Treasury bond (T-bond) Tuesday as well as the developments in the secondary market.

“So tomorrow would be a good indication of market sentiments in terms of at least in the intermediate part of the curve because it’s five years,” she said.

Just to conclude we have been rejecting for three weeks. We still have a good buffer for the Treasury because we’ve done Samurai (bond) and Panda (bond). And more importantly is the collections of the BIR (Bureau of Internal Revenue) and BOC (Bureau of Customs) both of which are performing very well,” she added.

Economists explain that T,-bill rates tend to go up anticipating better economic performance prilarily due to lower inflation expectations.

Former investment banker and Southern Mindanao Business Council of the European Chamber of Commerce in the Philippines Chairman Tony Peralta notes that the T-Bill rate increases can show that inflation rates are starting to slow down, something which bankers look out for along with impressive revenue performance when buying government securities.

"If government tax collections show improvement the securities it sells becomes more attractive," he said.

( with a report from PNA)