Gov’t awards T-bills with higher rates

The government made a full award of the Treasury bills (T-bills) it offered on Monday with higher rates due to hawkish signals from both the local and the US central banks.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned via the T-bills as total bids reached PHP 40.202 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 10.045 billion. The three-month paper was quoted at an average rate of 5.595%, 4.3 basis points (bps) above the 5.552% seen last week when accepted rates ranged from 5.5% to 5.624%

The government also raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 16.28 billion. The average rate for the six-month T-bill was at 5.968%, up by 2.9 bps from 5.939% seen last week, with accepted rates at 5.945% to 5.988%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt paper as demand for the tenor stood at PHP 13.877 billion. The average rate of the one-year T-bill rose by 4.6 bps to 6.119% from the 6.073% quoted last week. Accepted yields were from 6.085% to 6.199%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.6102%, 5.9444%, and 6.0960%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded bids for Treasury bills (T-bills) at today’s auction. The 91-, 182-, and 364-day T-bills fetched average rates of 5.595%, 5.968% and 6.119%, respectively. The auction was 2.7 times oversubscribed, attracting PHP 40.2 billion in total tenders,” the BTr said in a statement on Monday.

“With its decision, the Committee raised the full program of PHP 15 billion for the auction,” it added.

The T-bill rates moved up on Monday due to hawkish signals from both the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP), said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message.

“Tendered rates moved up following the hawkish rhetoric of various Federal Reserve officials last week, bolstering views of elevated US policy rates for a prolonged period of time,” a trader likewise said in an e-mail.

The Fed last week kept its policy rate unchanged at a range between 5.25% and 5.5% during its policy meeting.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

Meanwhile, BSP Governor Eli M. Remolona said in an interview with Bloomberg TV that the central bank might raise its benchmark rate again at its next meeting on Nov. 16 and hinted at the possibility of future rate hikes.

“We’re not convinced it would be the last one. It won’t be the last hike in the cycle,” he said. “We’re still in a hawkish stance.”

The Monetary Board on Thursday maintained its policy rate at 6.25% for a fourth straight meeting.

Interest rates on the overnight deposit and lending facilities were also left unchanged at 5.75% and 6.75%, respectively.

The BSP has raised borrowing costs by 425 bps from May 2022 to March 2023.

On Tuesday, the BTr will offer PHP 30 billion in reissued three-year Treasury bonds (T-bonds) with a remaining life of two years and 11 months.

The BTr wants to raise PHP 180 billion from the domestic market this month or P60 billion via 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 6.1% of gross domestic product this year. — Aaron Michael C. Sy