Treasury raises award for T-bills; rates increase

By Aaron Michael C. Sy, Reporter

THE PHILIPPINE government raised the award for Treasury bills (T-bills) it sold on Monday with higher rates amid inflationary concerns stemming from US President-elect Donald J. Trump’s planned fiscal policies.

The Bureau of the Treasury (BTr) raised P22.6 billion from the T-bills as bids reached P51.665 billion, more than twice the amount on offer but lower than the P59.425 billion in tenders last week.

“The market demanded higher rates due to uncertainties related to Trump’s fiscal policies,” a trader said by phone.

Mr. Trump’s plans could lead to reduced policy cuts by the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) due to potentially faster US inflation, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

Mr. Trump has promised to impose a 60% tariff on Chinese goods and at least a 10% levy on all other imports.

During his campaign, he also promised to deduct the interest on car loans, end double taxation for American expats, cut generator tax credits, taxes on tips and overtime hours for wage workers, eliminate a cap on a tax deduction known as “SALT” enjoyed mainly by wealthy taxpayers, and eliminate taxes on social security benefits.

He also promised to reduce the corporate tax to 15% from 21% for companies that make their products in the US and give companies buying heavy machinery a tax credit.

“The higher awarded volume and yields for this week’s Treasury bills reflect strong investor demand for shorter-term issuances,” another trader said in an e-mail. “This is due to bond yields moving higher from US and Philippine inflationary concerns, in addition to the weakening peso.”

The BTr borrowed P9.1 billion in 91-day T-bills, higher than the programmed P6.5 billion, as tenders reached P20.095 billion. The three-month paper was quoted at an average rate of 5.631%, up by 2.6 basis points (bps) from last week, with accepted offers at 5.608% to 5.65%.

Meanwhile, the government fully awarded P6.5 billion in 182-day securities, as bids reached P12.76 billion. The average rate of the six-month T-bill rose by 11 bps to 5.862% from last week, with accepted bid yields at 5.8% to 5.918%

The Treasury also raised P7 billion from the 364-day debt as demand hit P18.81 billion. The average rate of the one-year debt increased by 8.1 bps to 5.871% from last week. Accepted rates were 5.84% to 5.9%.

At the secondary market before the auction, the 91-, 182- and 364-day T-bills were quoted at 5.5763%, 5.8205% and 5.8264%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

This was the Treasury’s last T-bill auction for the month. It raised P62.6 billion its original P60-billion borrowing plan. The BTr also raised P92.6 billion in Treasury bonds from an original P90-billion plan.

The government seeks to raise P90 billion from the domestic market in December — P60 billion in T-bills and P30 billion in 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.