Gov’t partially awards Treasury bill offer

THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday as rates rose on expectations of faster inflation in February, which could prompt the Bangko Sentral ng Pilipinas (BSP) to hike borrowing costs aggressively this month.

The Bureau of the Treasury (BTr) raised just PHP 9.705 billion from its offer of T-bills on Monday, below the PHP 15-billion program, even as bids reached PHP 20.129 billion.

Broken down, the Treasury made a partial PHP 2.455-billion award of the 91-day T-bills versus the PHP 5-billion program, despite tenders reaching PHP 5.172 billion. The average rate of the three-month papers rising by 17.30 basis points (bps) to 4.586% from the 4.413% quoted for the last successful award of the tenor on Feb. 20. Accepted rates ranged from 4.53% to 4.65%.

The government likewise borrowed just PHP 2.25 billion via the 182-day securities, lower than the PHP 5-billion plan, even as demand for the tenor reached P6.8 billion. The six-month T-bill was quoted at an average rate of 5.378%, rising by 20.1 bps from 5.177% the previous week, with the BTr only accepting offers with yields of 5.378%.

Meanwhile, the BTr made a full PHP 5-billion award of the 364-day debt papers as bids for the tenor reached PHP 8.157 billion. The average rate of the one-year paper climbed by 13 bps to 5.707% from the 5.577% fetched last week. Accepted yields were from 5.65% to 5.743%.

“Results were mixed in today’s Treasury bill auction as the Auction Committee decided to fully award bids for the 364-day T-bills while partially awarding the 91- and 182-day securities. The 364-day T-bills fetched an average of 5.707%, while the 91- and 182-day T-bill rates were capped at 4.586% and 5.378%, respectively,” the BTr said in a statement on Monday.

“The auction was 1.3 times oversubscribed, attracting P20.1 billion in total tenders. With its decision, the committee raised PHP 9.7 billion of the PHP 15 billion offering,” it added.

The trader said in a Viber message that investors asked for higher rates ahead of the release of February inflation data, which resulted in the partial award.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message that the government made a partial award of its T-bill offer due to an increase in bid rates due to expectations of elevated inflation and aggressive tightening by the central bank.

A BusinessWorld poll of 17 analysts yielded a median estimate of 8.9% for February headline inflation, within the 8.5% to 9.3% forecast of the BSP for the month.

If realized, this will be faster than the 14-year high of 8.7% seen in January and the 3% in the same month a year earlier. February would also mark the 11^th consecutive month that inflation exceeded the BSP’s 2-4% target for the year.

The Philippine Statistics Authority will release February consumer price index data on March 7, Tuesday.

BSP Governor Felipe M. Medalla on Friday said the central bank may hike rates by another 50 bps this month if February inflation exceeds 9%.

The Monetary Board will hold its second policy meeting for this year on March 23.

At its February 16 review, the BSP raised benchmark interest rates by 50 bps for a second straight meeting, bringing its key rate to 6%, the highest in nearly 16 years.

The Monetary Board has increased borrowing costs by a total of 400 bps since May 2022.

T-bill rates climbed amid recent hawkish signals from US Federal Reserve officials, Mr. Ricafort added.

The US central bank hiked its fed funds rate by 25 bps at its January 31 to February 1 meeting to a range between 4.5% and 4.75%.

The Fed has raised rates by a total of 450 bps since March 2022. Its next policy review is on March 21-22.

On Tuesday, the BTr will offer PHP 25 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and six months.

The Treasury wants to raise P200 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 125 billion from T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy