Gov’t partially awards Treasury bills at higher rates

THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it auctioned off on Tuesday as investors wanted higher yields at par with benchmark borrowing costs.

The Bureau of the Treasury (BTr) raised just PHP 13.9 billion from its offer of T-bills on Tuesday, below the PHP 15-billion program, with total bids reaching PHP 21.609 billion.

Broken down, the Treasury borrowed just PHP 4.6 billion from the 91-day T-bills, below the PHP 5-billion plan, despite tenders for the tenor reaching PHP 6.744 billion. The average rate of the three-month paper rose by 26.9 basis points (bps) to 5.314% from the 5.045% seen at last week’s auction, with the accepted rates ranging from 5.05% to 5.5%.

The BTr likewise raised just PHP 4.3 billion via the 182-day debt papers, lower than the PHP 5-billion program, with bids at PHP 8.578 billion. The average rate of the six-month T-bill went up by 2.6 bps to 5.7% from 5.674% last week. Accepted yields were from 5.673% to 5.75%.

Meanwhile, the government made a full PHP 5-billion award of the 364-day securities as demand for the tenor stood at PHP 9.287 billion. The one-year paper was awarded at an average rate of 5.991%, inching up by 1.4 bp from 5.977% the previous week, with accepted rates ranging from 5.95% to 6%.

At the secondary market on Tuesday, the 91-, 182-, and 364-day T-bills were quoted at 5.1479%, 5.6411%, and 5.9944%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

“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 5.991%, while the 91- and 182-day T-bill rates were capped at 5.314% and 5.7%, respectively,” the BTr said in a statement on Tuesday.

“The auction was 1.6 times oversubscribed, with total bids reaching PHP 24.6 billion. With its decision, the committee raised PHP 13.9 billion of the PHP 15 billion offering,” it added.

The government made a partial award of its T-bill offer as the market wanted higher returns, a trader said in a Viber message.

“Investors are simply demanding higher rates because the overnight rate is at 6.25%, while these papers are longer but are yielding way below the policy rate,” the trader said.

The trader noted that the average rate of the one-year T-bill is already higher than the 5.883% average fetched for the reissued seven-year Treasury bonds (T-bonds) offered last week, as well as the 5.9283% quoted for the five-year bond at the secondary market as of April 5.

The Bangko Sentral ng Pilipinas (BSP) last month hiked benchmark interest rates by 25 bps to help bring down elevated inflation.

This brought the yield on its overnight reverse repurchase facility or its key rate to 6.25%.

Interest rates on the overnight deposit and lending facilities were also hiked by 25 bps to 5.75% and 6.75%, respectively.

Since May 2022, the central bank raised borrowing costs by a total of 425 bps.

The Monetary Board’s next meeting will be on May 18.

T-bill rates rose due to bets of a 25-bp hike by the US Federal Reserve in its May 2-3 meeting, which could be matched by the BSP in its own review next month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Fed last month raised its target interest rate by 25 bps to the 4.75%-5% range.

It has hiked rates by 475 bps since March 2022.

On Wednesday, the BTr will offer PHP 25 billion in reissued 10-year T-bonds that have a remaining life of nine years and five months.

The Treasury wants to raise PHP 160 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 100 billion via T-bonds.

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