Gov’t makes partial award of T-bill offer

THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it auctioned off on Monday due to weak demand as investors stayed on the sidelines ahead of the policy meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) this week.

The Bureau of the Treasury (BTr) raised just PHP 10.636 billion from its offer of T-bills on Monday, below the PHP 15-billion program. Total bids reached PHP 17.806 billion, just slightly higher than the amount on offer.

Broken down, the Treasury made a partial PHP 2.531-billion award of the 91-day T-bills versus the PHP 5-billion program as tenders for the tenor reached only PHP 4.041 billion. The average rate of the three-month paper rose by 28 basis points (bps) to 4.911% from the 4.664% seen during last week’s auction. Accepted rates ranged from 4.74% to 4.974%.

The government likewise borrowed just PHP 3.7 billion via the 182-day securities, lower than the PHP 5-billion plan, even as demand for the tenor reached PHP 6.97 billion. The six-month T-bill was quoted at an average rate of 5.556%, climbing by 11.90 bps from 5.437% the previous week, with accepted rates ranging from 5.475% to 5.6%.

Lastly, the BTr raised only PHP 4.406 billion from the 364-day debt papers against the PHP 5-billion program, even as bids for the tenor reached PHP 6.795 billion. The average rate of the one-year paper went up by 14.70 bps to 5.864% from the 5.717% fetched last week. Accepted yields were from 5.775% to 5.95%.

At the secondary market on Monday, the 91-, 182-, and 364-day T-bills were quoted at 4.8621%, 5.4456%, and 5.8008%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

The government made a partial award of its offer “to anchor rates within levels in the secondary market,” National Treasurer Rosalia V. de Leon told reporters in a Viber message after the auction.

Ms. De Leon said investors “remain on edge” ahead of the Fed’s policy decision and due to the banking sector turmoil.

“Treasury bill auction yields were again higher week on week amid market expectations of a 25-bp Fed rate hike on March 22, with about 50% odds, and could be matched locally on Thursday, March 23, to help stabilize the peso and overall inflation,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A trader said by phone that the partial award was due to high rates amid uncertainties in the market, with the banking crisis in the US seen to indirectly affect the BSP’s policy decision this week.

The Fed will meet to review its policy settings on March 21-22. Markets are pricing in an increase of just 25 bps this week following the failures of Silicon Valley Bank and Signature Bank.

Over the weekend, UBS said that it will buy Credit Suisse for 3 billion francs (USD 3.2 billion), which added to global banking sector woes.

The US central bank hiked the fed funds rate by 25 bps at its January 31 to February 1 meeting to a range between 4.5% and 4.75%.

Since March 2022, the Fed has raised rates by a total of 450 bps.

Meanwhile, the BSP will hold its policy meeting on March 23. A BusinessWorld poll held last week showed 12 out of 14 analysts see the Monetary Board hiking rates by 25 bps on Thursday amid lingering concerns over elevated inflation and the fallout from recent bank failures in the United States.   

The BSP last month raised benchmark interest rates by 50 bps for a second straight meeting, bringing its policy rate to 6%.

It has now increased borrowing costs by 400 bps since May 2022.

On Tuesday, the BTr will offer PHP 25 billion in reissued 20-year Treasury bonds (T-bonds) that have a remaining life of 19 years and eight months.

The Treasury wants to raise PHP 200 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 125 billion from 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