Gov’t makes full award of Treasury bill offering

The government made a full award of the Treasury bills (T-bills) it offered on Tuesday at mostly slightly higher rates, following the surge in US Treasury yields ahead of US Federal Reserve Chair Jerome H. Powell’s speech on Friday.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned via the T-bills it auctioned off on Tuesday as total bids reached PHP 42.991 billion or more than twice the amount on offer.

Broken down, the Treasury made a full PHP 5-billion award of the 91-day T-bills as tenders for the tenor reached PHP 18.164 billion. The three-month paper was quoted at an average rate of 5.671%, 3.3 basis points (bps) below the 5.704% seen last week, with accepted rates ranging from 5.643% to 5.690%.

The government also raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 10.495 billion. The average rate for the six-month T-bill was at 5.986%, rising by 4.1 bps from the 5.945% seen last week, with accepted rates at 5.9% to 6.1%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt papers as demand stood at PHP 13.882 billion. The average rate of the one-year T-bill likewise inched up by 0.9 bp to 6.334% from the 6.325% quoted last week. Accepted yields were from 6.25% to 6.35%.

At the secondary market before Tuesday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.7649%, 5.9996%, and 6.3285%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

T-bill rates were mostly higher following the surge in US Treasury yields ahead of the Fed’s Jackson Hole conference, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“T-bill rates fetched today were somehow sideways from the previous week as local market participants remained cautious on the possible policy remarks from Fed Chair Powell this week in the Jackson Hole Symposium of Central Bankers,” a trader likewise said in an e-mail on Tuesday.

US Treasury yields rose to decade highs as investors awaited a Federal Reserve meeting on Friday at Jackson Hole, Wyoming, Reuters reported.

Longer-dated US Treasury yields were up, with the 30-year yield hitting 4.474%, its highest since April 2011. Bond yields move inversely with prices.

The 10-year Treasury hit 4.354%, the highest since November 2007 — before the collapse of Lehman Brothers almost a year later fully ushered in the Great Financial Crisis.

Mr. Powell is scheduled to deliver a speech on the economic outlook at the Kansas City Jackson Hole Economic Policy Symposium on Aug. 25, where markets assume he will note the jump in yields and the recent run of strong economic data.

The Fed raised borrowing costs by 25 bps last month, bringing its target interest rate to a range between 5.25% and 5.5%.

The US central bank has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

The Federal Open Market Committee will next meet on Sept. 19-20 to review policy.

On Wednesday, the BTr will offer PHP 30 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 15 years and five months.

The Treasury wants to raise PHP 225 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 150 billion via 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 with Reuters