Philippine Government Misses T-bill Target as Market Awaits Inflation Data

In a recent development in the Philippines’ financial sector, the government faced a shortfall in raising its target amount through the sale of Treasury bills (T-bills). The planned borrowing amount was set at P10 billion, but only P9.69 billion was raised in the latest auction. This outcome occurred after a period of unusually low rates in previous weeks, with investors eagerly awaiting the release of November’s inflation data.

The demand for T-bills, while substantial at 3.6 times the original offer size, represented a decrease from the prior week’s demand of P72.22 billion. Michael Ricafort, chief economist at Rizal Commercial Banking Corp., attributed this to a “slight correction” in yields, which had previously fallen to notably low levels. This correction was observed in the average auction yields of the Treasury bills, which rose slightly week-on-week, a day before the expected easing of inflation data.

The Bangko Sentral ng Pilipinas (BSP) projected November’s inflation to be between 4 and 4.8 percent. If this projection holds true, it would indicate a return to the central bank’s target inflation range of 2 to 4 percent and a further easing from the 4.9 percent inflation rate recorded in October. Despite this potential easing, BSP Governor Eli Remolona Jr. signaled that the central bank would maintain a cautious stance and be prepared to resume tightening measures, such as rate hikes, if necessary.

In terms of specific T-bill yields, the average yield for the 91-day paper increased to 4.996 percent, up from 4.753 percent the previous week, attracting the most tenders among the various tenors with orders totaling P15.51 billion. The 182-day T-bill also saw an increase in its average rate, climbing to 5.267 percent compared to the last auction’s rate of 5.181 percent​​​​​​​​.