Gov’t fully awards T-bills at slightly higher rates

The government made a full award of the Treasury bills (T-bills) it offered on Monday at higher rates due to inflationary pressures from elevated global oil prices recently and a weaker peso.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned from the T-bills it offered on Monday as total bids reached PHP 44.84 billion or nearly thrice the amount on the auction block.

Broken down, the BTr borrowed PHP 5 billion as programmed from the 91-day T-bills as tenders for the tenor reached PHP 13.1 billion. The three-month paper was quoted at an average rate of 5.888%, 1.8 basis points (bps) higher than the 5.87% seen last week. Accepted rates ranged from 5.845% to 5.92%.

The government likewise made a full PHP 5-billion award of the 182-day securities, with bids reaching PHP 15.98 billion. The average rate for the six-month T-bill stood at 6.002%, up by 2.9 bps from the 5.973% fetched last week, with accepted rates at 5.985% to 6.002%.

Lastly, the Treasury raised PHP 5 billion as planned via the 364-day debt papers as demand for the tenor totaled PHP 15.76 billion. The average rate of the one-year debt went up by 3.6 bps to 6.08% from the 6.044% quoted last week. Accepted yields were from 6.055% to 6.09%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.8663%, 5.9804%, and 6.0344%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

“The awarded T-bill rates today reflected renewed domestic inflationary concerns emanating from the spike in global crude oil prices and the sudden depreciation of the local currency last week,” a trader said in an e-mail on Monday.

Headline inflation picked up to 3.7% year on year in March from 3.4% in February. This was slower than the 7.6% clip in the same month last year and marked the fourth straight month that the consumer price index (CPI) was within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% annual target.

For the first quarter, headline inflation averaged 3.3%, below the BSP’s baseline forecast of 3.8% and risk-adjusted forecast of 4%.

Meanwhile, on Monday, crude oil prices declined as the potential for a major supply disruption waned as fears of a wider Middle East conflict ebbed, Reuters reported.

Iran said on Friday that it had no plan to retaliate following an apparent Israeli drone attack within its borders, which in turn followed an unprecedented Iranian missile and drone attack on Israel days before.

With a rise in US stockpiles as the backdrop, Brent futures fell 67 cents or 0.77% to USD 86.62 a barrel. The front-month US West Texas Intermediate (WTI) crude contract for May, which expires on Monday, fell 63 cents, or 0.76%, to $82.51 a barrel, while the more active June contract dropped 64 cents to $81.58 a barrel.

Brent crude futures briefly topped $92 a barrel last week, the highest since October.

On the other hand, the peso closed at P57.65 per dollar on Friday, depreciating by 46 centavos from its P57.19 finish on Thursday and marking its worst finish since November 2022.

Year to date, the local unit has depreciated by P2.28 from its P55.37 close on Dec. 29, 2023.

T-bill rates rose for the third straight week on Monday due to hawkish signals from the US Federal Reserve and the BSP, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. last week said they could begin their easing cycle in early 2025 if price risks persist, but they could still cut rates by 25 bps in the third quarter if inflation is within target and economic growth is weak.

The Monetary Board kept its target reverse repurchase rate unchanged at a near 17-year high of 6.5% this month. It hiked borrowing costs by 450 bps from May 2022 to October 2023 to help bring down elevated inflation.

Meanwhile, in the US, more robust US economic data spurred additional Federal Reserve officials to signal no rush to lower interest rates, Reuters reported.

According to a majority of 100 economists polled by Reuters, the Fed will wait until September to cut its key rate, with half of the respondents saying there will be only two cuts this year.

The US central bank last month kept its target rate at the 5.25%-5.5% range for a fifth straight meeting following cumulative hikes worth 525 bps from March 2022 to July 2023.

On Tuesday, the BTr will offer PH P30 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 19 years and 10 months.

The Treasury is looking to raise PHP 195 billion from the domestic market this month or PHP 75 billion from T-bills and PHP 120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.6% of gross domestic product this year. — A.M.C. Sy with Reuters