Gov’t partially awards T-bill offer

THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it auctioned off on Tuesday as investors continued to ask for higher yields for the shorter tenors.

The Bureau of the Treasury (BTr) raised just PHP 6.915 billion from its offer of T-bills on Tuesday, lower than the PHP 15-billion program, even with total bids reaching PHP 22.123 billion.

Broken down, the Treasury borrowed just PHP 1.915 billion via the 91-day T-bills despite tenders for the tenor reaching PHP 5.075 billion, above the P5-billion plan. The average rate of the three-month papers rose by 13.10 basis points (bps) to 6% from the 5.869% seen at last week’s auction, with the Treasury only accepting bids with this yield.

Meanwhile, the government made a full PHP 5-billion award of the 363-day securities, with demand at PHP 9.888 billion. The one-year paper was awarded at an average rate of 6.247%, inching up by 3.8 bps from 6.209% the previous week, with accepted rates ranging from 6.100% to 6.299%.

On the other hand, the BTr did not award any 181-day debt papers even as bids  for the tenor stood at PHP 7.16 billion, above the PHP 5-billion program. Had the government made a full award, the average rate of the six-month T-bill would have gone up by 23.70 bps to 6.23% from 5.993% last week as investors asked for yields ranging from 6.129% to 6.3%.

The six-month and one-year tenors were adjusted from the usual 182 days and 364 days, respectively, as their maturity falls on a holiday.

At the secondary market on Tuesday, the 91-, 182-, and 364-day T-bills were quoted at 5.8194%, 6.012%, and 6.1419%, respectively, based on PHP Bloomberg Valuation (BVAL) Service Reference Rates data provided by the BTr.

“Results were mixed in today’s Treasury bill auction as the Auction Committee decided to fully award bids for the 363-day T-bill while partially awarding the 91-day T-bill and rejecting bids for the 181-day T-bill. The 363-day security fetched an average rate of 6.247% while the 91-day T-bill was capped at 6%. Meanwhile, the average rate for the 181-day T-bill reached 6.23%, had it been awarded,” the BTr said in a statement on Tuesday.

“The auction was 1.5 times oversubscribed, attracting PHP 22.1 billion in total tenders. With its decision, the committee raised PHP 6.9 billion of the PHP 15-billion offering,” it added.

T-bill rates seen on Tuesday were within expectations as investors continued to demand yields closer to the Bangko Sentral ng Pilipinas’ (BSP) key rate, with inflation seen staying elevated despite slowing from multi-year highs seen previously, a trader said in a Viber message.

“The continued increase in T-bill auction yields was consistent with the recent increase in short-term PHP BVAL yields, especially since April 2023, moving closer to the local policy rate of 6.25%,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said likewise in a Viber message.

The BSP has raised borrowing costs by 425 bps since May 2022 to help bring down elevated inflation, with its policy rate now at 6.25% — the highest in nearly 16 years.

The central bank last week said April inflation likely settled within the 6.3-7.1% range, slower than the 7.6% in March.

If realized, this would surpass the BSP’s 2-4% target for the 13^th consecutive month.

April inflation data will be released on Friday.

“The Treasury bill auction yields again mostly higher week-on-week (except for the six-month tenor where all bids were rejected) ahead of the widely expected 25-bp Fed rate hike on May 3, 2023,” Mr. Ricafort added.

The US Federal Reserve is holding its policy review on May 2-3.

In March, it hiked borrowing costs by 25 bps, bringing its target interest rate to the 4.75% to 5% range.

The US central bank has increased rates by a total of 475 bps since March 2022.

On Wednesday, the BTr will auction off PHP 25 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of five years and eight months.

The Treasury wants to raise PHP 175 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 100 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. — By A.M.C. Sy