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

THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it auctioned off on Monday as investors continued to ask for higher yields to match rising benchmark interest rates.

The Bureau of the Treasury (BTr) raised just PHP 9.175 billion from its offer of T-bills on Monday, below the PHP 15-billion program, despite total bids reaching PHP 19.825 billion.

Broken down, the Treasury borrowed just PHP 1.5 billion from the 91-day T-bills, well below the PHP 5-billion plan, despite tenders for the tenor reaching PHP 5.2 billion. The average rate of the three-month paper rose by 23.60 basis points (bps) to 5.55% from the 5.314% seen at last week’s auction, with the Treasury only accepting bids with this yield.

The BTr likewise raised only PHP 3.45 billion via the 182-day debt papers, lower than the PHP 5-billion program, even with bids at PHP 7.05 billion. The average rate of the six-month T-bill went up by 11.20 bps to 5.812% from 5.7% last week. Accepted yields were from 5.788% to 5.85%.

The government also made a partial PHP 4.225-billion award of the 364-day securities, below the PHP 5-billion plan, even as demand for the tenor stood at PHP 7.575 billion. The one-year paper was awarded at an average rate of 6.073%, rising by 8.20 bps from 5.991% the previous week, with accepted rates ranging from 5.99% to 6.128%.

At the secondary market on Monday, the 91-, 182-, and 364-day T-bills were quoted at 5.4374%, 5.7605%, and 5.9998%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

“The Auction Committee partially awarded bids for Treasury bills (T-bills) at today’s auction. Rates for the 91-, 182 -, and 364-day T-bills were capped at 5.550%, 5.812% and 6.073%, respectively,” the BTr said in a statement on Monday.

“The auction was 1.3 times oversubscribed, attracting PHP 19.8 billion in total tenders. With its decision, the Committee raised a total of PHP 9.2 billion out of the PHP 15-billion offering,” it added.

The Treasury made a partial award of its T-bill offer as investors asked for higher rates amid rising benchmark borrowing costs, a trader said in a Viber message.

“It’s worth noting, though, that the one-year paper’s average rate is higher than the 6.5-year paper. Secondary market bid for the FXTN 7-68 (seven-year bonds) is currently at 6.05%,” the trader said.

The Bangko Sentral ng Pilipinas (BSP) last month hiked benchmark interest rates by 25 bps to help bring down elevated inflation.

This brought the yield on its overnight reverse repurchase facility or its key rate to 6.25%.

Since May 2022, the central bank raised borrowing costs by a total of 425 bps.

The Monetary Board’s next meeting is on May 18.

The government partially awarded its T-bill offer as yields rose on expectations of more rate hikes from the US Federal Reserve in its May 2-3 and June 13-14 meetings, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Fed last month raised its target interest rate by 25 bps to the 4.75%-5% range.

It has hiked borrowing costs by 475 bps since March 2022.

On Tuesday, the BTr will offer PHP 25-billion fresh 13-year Treasury bonds (T-bonds).

The Treasury wants to raise PHP 160 billion from the domestic market this month, or PHP 60 billion via T-bills and P100 billion via T-bonds.

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