Gov’t partially awards T-bill offer as investors ask for higher yields

THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday due to tepid demand as investors wanted higher yields.

The Bureau of the Treasury (BTr) raised just PHP 12.837 billion from its offer of T-bills on Monday, below the P15-billion program. Bids reached PHP 21.629 billion, just above the amount on offer.

Broken down, the Treasury made a partial PHP 3.781-billion award of the 91-day T-bills versus the PHP 5-billion program, despite tenders for the tenor reaching PHP 6.091 billion. The average rate of the three-month paper rose by 7.8 basis points (bps) to 4.664% from the 4.586% seen in last week’s auction. Accepted rates ranged from 4.57% to 4.75%.

The government likewise borrowed just PHP 4.056 billion via the 182-day securities, lower than the PHP 5-billion plan, even as demand reached PHP 7.816 billion. The six-month T-bill was quoted at an average rate of 5.437%, up by 5.9 bps from 5.378% the previous week, with accepted rates ranging from 5.408% to 5.475%.

Meanwhile, the BTr made a full PHP 5-billion award of the 364-day debt papers as bids for the tenor reached PHP 7.722 billion. The average rate of the one-year paper inched up by 1 bps to 5.717% from the 5.707% fetched last week. Accepted yields were from 5.69% to 5.775%.

National Treasurer Rosalia V. de Leon told reporters in a Viber message after the auction that the BTr made a partial award of the three- and six-month tenors and a full award of the one-year T-bill “to ensure rates are within secondary levels.”

At the secondary market on Monday, the 91-, 182-, and 364-day T-bills were quoted at 4.711%, 5.33%, and 5.716%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

A trader said in a Viber message that demand for the three- and six- month papers was weak as their average yields remain low.

Investors prefer higher-yielding longer tenors such as the one-year paper, the trader said.

The market asked for higher yields ahead of a possible US Federal Reserve rate hike next week, which could be matched by the Bangko Sentral ng Pilipinas (BSP) in its own review, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Fed will hold its next policy meeting on March 21-22.

The US central bank hiked its target interest 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 own review on March 23.

The Monetary Board last month hiked benchmark rates by 50 bps for a second straight meeting, bringing its policy rate to 6%.

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

On Tuesday, the BTr will offer PHP 25 billion in reissued 25-year Treasury bonds (T-bonds) that have a remaining life of 12 years and six 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. — A.M.C. Sy