Gov’t fully awards T-bills as yields drop

The government made a full award of the Treasury bills (T-bills) it offered on Monday as rates mostly decreased amid easing tensions in the Middle East and steady US inflation.

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 51.204 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 P16.16 billion. The three-month paper was quoted at an average rate of 5.869%, 1.9 basis points (bps) lower than the 5.888% seen last week. Accepted rates ranged from 5.835% to 5.889%.

The government likewise made a full PHP 5-billion award of the 182-day securities, with bids reaching PHP 18.59 billion. The average rate for the six-month T-bill stood at 5.988%, down by 1.4 bps from the 6.002% fetched last week, with accepted rates at 5.97% to 6.013%.

Lastly, the Treasury raised PHP 5 billion as planned via the 364-day debt papers as demand for the tenor totaled PHP 16.454 billion. The average rate of the one-year debt inched up by 0.1 bp to 6.081% from the 6.08% quoted last week. Accepted yields were from 6.065% to 6.10%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.9018%, 6.0201%, and 6.0508%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

T-bill yields mostly dropped week on week on Monday amid easing tensions between Iran and Israel, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Iran’s foreign minister said the crew of a seized Portuguese-flagged ship linked to Israel have been granted consular access and are expected to be freed, Iranian media reported on Saturday, Reuters reported.

Iran’s Revolutionary Guards seized the container vessel MSC Aries with a crew of 25 in the Strait of Hormuz on April 13, days after Tehran vowed to retaliate for a suspected Israeli strike on its consulate in Damascus. Iran had said it could close the crucial shipping route.

On Monday, Brent fell 0.9% to USD 88.70 a barrel, while US crude similarly edged 0.8% lower to USD 83.17 per barrel, as news of a potential Gaza ceasefire also eased fears of supply constraints.

A Hamas delegation will visit Cairo on Monday for talks aimed at securing a ceasefire, a Hamas official told Reuters on Sunday, as mediators stepped up efforts to reach a deal ahead of an expected Israeli assault on the southern city of Rafah.

“The awarded rates went lower today following the mild US PCE (personal consumption expenditures) inflation reading last Friday,” a trader said in an e-mail on Monday.

US monthly inflation rose moderately in March, but stubbornly higher costs for housing and utilities suggested the Federal Reserve could keep interest rates elevated for a while, Reuters reported.

The PCE price index increased 0.3% last month, matching the unrevised gain in February, the Commerce department’s Bureau of Economic Analysis said.

In the 12 months through March, inflation rose 2.7% after advancing 2.5% in February. The increase in inflation last month was broadly in line with economists’ expectations.

There had been fears that inflation could exceed forecasts in March after the release of the advance gross domestic product report for the first quarter on Thursday showed price pressures heated up by the most in a year.

The spike in inflation occurred in January. The PCE price index is one of the inflation measures tracked by the US central bank for its 2% target. Monthly inflation readings of 0.2% over time are necessary to bring inflation back to target.

Fed policy makers are expected to leave rates unchanged this week. The central bank has kept its benchmark overnight interest rate in the 5.25%-5.5% range since July. It has raised the policy rate by 525 bps since March 2022.

Excluding the volatile food and energy components, the PCE price index increased 0.3% in March after rising by the same unrevised margin in February. Core inflation increased 2.8% on a year-on-year basis in March, matching February’s advance.

Monday’s T-bill offering was the last for this month. The government raised PHP 77 billion from the short-term papers in March, above the PHP 75-billion program, as it upsized one auction award amid strong demand.

On Tuesday, the BTr will offer PHP 30 billion in reissued 20-year Treasury bonds with a remaining life of seven years and two months.

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