Gov’t makes full award of Treasury bills

THE GOVERNMENT fully awarded the Treasury bills (T-bills) it auctioned off on Monday as rates were only marginally higher across all tenors amid strong demand and expectations of slower monetary tightening by the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned from the T-bills it auctioned off on Monday as bids reached PHP 45.891 billion, more than thrice the amount on offer.

Broken down, the Treasury raised PHP 5 billion as planned via the 91-day T-bills with tenders reaching PHP 16.321 billion. The average rate of the three-month papers rose by 1.8 basis points (bps) to 4.25% from the 4.232% quoted for the tenor last week, with accepted rates ranging from 4.23% to 4.27%.

The government also made a full P5-billion award of the 182-day securities as bids for the papers reached P15.2 billion. The six-month tenor was quoted at an average rate of 4.967%, inching up by 0.8 bp from the 4.959% seen in the previous week, with accepted rates ranging from 4.95% to 4.989%.

Lastly, the BTr raised the programmed PHP 5 billion from the 364-day debt papers as demand for the tenor reached PHP 14.37 billion. The average rate of the one-year T-bill rose to 5.448%, 5.5 bps higher than the 5.393% fetched for the tenor last week. Accepted yields ranged from 5.429% to 5.493%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 4.3887%, 5.0447%, and 5.413%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded bids for Treasury bills at today’s auction… The auction was 3.1 times oversubscribed with total bids reaching P45.9 billion. With its decision, the Committee raised the full program of P15 billion for the auction,” the BTr said in a statement on Monday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the Treasury fully awarded its offer as rates rose only slightly amid dovish signals from the BSP on rates and banks’ reserve requirement ratios (RRR).

BSP Governor Felipe M. Medalla last week said the central bank is likely to raise benchmark interest rates by 25 or 50 bps at its meeting on Feb. 16 amid the need to anchor inflation expectations.   

He also said the pressure to match the US Federal Reserve’s policy tightening was waning, and the need for large policy adjustment is “no longer there.”    

The BSP’s policy-setting Monetary Board raised borrowing costs by a total of 350 bps last year to tame inflation. This brought its policy rate to a 14-year high of 5.5%.

Meanwhile, the Fed delivered 425 bps in rate hikes last year, which brought its own key rate to 4.25-4.5%. It will hold its first policy review for this year from Jan. 31 to Feb. 1.

Mr. Medalla likewise said last week that they may cut the reserve requirements for banks in the first half of 2023.

The RRR for big banks is currently at 12%, one of the highest in the region. Reserve requirement ratios for thrift and rural lenders are at 3% and 2%, respectively.

The BSP earlier committed to bringing down the RRR of big banks to single digits by this year.   

Meanwhile, a trader said in a Viber message that the T-bill yields fetched on Monday were within expectations.

“Looks like there’s not much interest to aggressively bid on T-bills since longer tenors offer yield pickup,” the trader added.

On Tuesday, the BTr will offer PHP 35 billion in 20-year Treasury bonds (T-bonds) with a remaining life of 19 years and 10 months.

The Treasury wants to raise PHP 200 billion from the domestic market in January, or PHP 60 billion through T-bills and PHP 140 billion via T-bonds.

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