Gov’t partially awards T-bill offer

The government made a partial award of the Treasury bills (T-bills) it offered on Monday with higher rates across the board as US Treasury yields rose last week after Fitch Ratings downgraded the United States’ credit rating.

The Bureau of the Treasury (BTr) raised just PHP 11.75 billion via the T-bills it auctioned off on Monday, short of the PHP 15-billion program, even as total bids reached PHP 38.062 billion or more than two times the amount on the auction block.

Broken down, the Treasury awarded PHP 3.6 billion in 91-day T-bills out of the PHP 5-billion program even as tenders for the tenor reached PHP 17.509 billion. The three-month paper was quoted at an average rate of 5.598%, 37.4 basis points (bps) above the 5.224% seen last week, with accepted rates ranging from 5.573% to 5.615%.

The government likewise raised just PHP 3.15 billion from the 182-day securities out of the planned PHP 5 billion despite bids reaching PHP 10.82 billion. The average rate for the six-month T-bill was at 5.99%, rising by 20.1 bps from the 5.789% seen last week, with accepted rates at 5.95% to 5.998%.

Meanwhile, the BTr borrowed PHP 5 billion as programmed via the 364-day debt papers as demand reached PHP 9.733 billion. The average rate of the one-year T-bill went up by 8.4 bps to 6.294% from the 6.21% quoted last week. Accepted yields were from 6.15% to 6.325%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.7015%, 5.9234%, and 6.1975%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“Results were mixed in today’s Treasury bills (T-bills) auction as the Auction Committee decided to fully award bids for the 364-day T-bills while partially awarding the 91- and 182-day securities. The 364-day T-bills fetched an average rate of 6.294% while the 91- and 182-day securities were capped at 5.598% and 5.990%, respectively,” the BTr said in a statement on Monday.

“The auction was 2.5 times oversubscribed, with total tenders reaching PHP 38.1 billion. With its decision, the Committee raised PHP 11.8 billion of the PHP 15-billion offering,” it added.

The government partially awarded the T-bills as the papers fetched higher yields, reflecting “the impact of the latest downgrade in the US sovereign credit rating by Fitch,” a trader said in an e-mail.

Yields, which move inversely to bond prices, spiked last week following Fitch’s downgrade and on the prospect of a flood of Treasury supply in the third quarter, Reuters reported.

The benchmark 10-year yield fell sharply after Friday’s jobs report but remained above 4%, a level last seen in November 2022.

Fitch last week downgraded the US government’s top credit rating, a move that drew an angry response from the White House and surprised investors, coming despite the resolution of the debt ceiling crisis two months ago.

Fitch downgraded the United States to “AA+” from “AAA,” citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.

The increase in T-bill yields came due to higher global crude oil prices and a weaker peso recently, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Oil prices edged down on Monday but were still near their highest levels since mid-April after top producers Saudi Arabia and Russia pledged to keep supplies down for another month to tighten global markets further and support prices.

Brent crude futures slipped by 15 cents or 0.2% to $86.09 a barrel by 0640 GMT, while US West Texas Intermediate crude was at $82.67 a barrel, down 15 cents, or 0.2%.

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

The Treasury wants to raise PHP 225 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 150 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. — A.M.C. Sy with Reuters