Yields of Treasury bills (T-bills) closed mixed at Monday’s auction, with a partial award for the 91-day security and the offer for the remaining tenors fully awarded.
Analysts said the results indicated investors were anticipating the 91-day T-bills would soon fetch higher short-term rates due to inflation concerns, uncertain monetary policy stance by the Bangko Sentral ng Pilipinas (BSP) and external volatility.
“Some market players may also be pricing in geopolitical risk or hedging against near-term liquidity pressures,” John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.
He said the partial award for the 91-day tenor reflects investor expectations of higher short-term rates.
Rivera also expects more selective awards in the next auctions, “particularly for short tenors.”
The BTr announced Monday that the auction was 2.3 times oversubscribed, with total bids of P57.7 billion, higher than the P25 billion offer.
Only P24 billion out of the P25 billion was raised. Specifically, the BTr awarded P7 billion out of the P8 billion program for the 91-day paper.
Meanwhile, P8 billion and P9 billion were granted for the 180-day and 364-day IOUs, respectively, with average rates of 5.607 percent and 5.651 percent. These were below the prevailing secondary market rates.
In comparison, the Bloomberg Valuation Service (BVAL) rate is 5.642 percent for the 6-month tenor and 5.696 percent for the 1-year security.
The 91-day tenor was capped at an average of 5.526 percent, above the BVAL rate of 5.479 percent. Had a full award been made, it would have attracted an even higher rate of 5.538 percent.
Rivera said the decision of the BTr to reject higher bids signals its intent to manage borrowing costs carefully, especially amid frontloaded financing and a still-volatile global environment.
Chief economist Michael Ricafort of Rizal Commercial Banking Corp. said the average auction yields ended lower following the decline in global crude oil prices to their lowest level in more than two weeks. This somehow offset all of the world oil price increases since the Israel-Iran conflict started on June 13. A ceasefire is currently in place between the two countries.
Ricafort also observed the peso-dollar exchange rate being at two-week lows since the Israel-Iran conflict began. He said this corrected most of the US dollar’s increase “thereby (it) could lead to a rollback in local fuel pump prices and ease inflationary pressures, or could lead to a slight pickup in overall inflation, at the very least.”
The peso closed stronger at P56.33 versus the greenback on Monday, June 30, from P56.57 on Friday.
