Gov’t partially awards T-bills as rates rise

The government made a partial award of the Treasury bills (T-bills) it offered on Monday as rates climbed due to hawkish remarks from the US Federal Reserve chief.

The Bureau of the Treasury (BTr) raised just PHP 9.219 billion via the T-bills it auctioned off on Monday versus the PHP 15-billion program, even as total bids reached PHP 17.419 billion.

Broken down, the Treasury raised only PHP 2.954 billion via the 91-day T-bills out of the planned PHP 5 billion, even as tenders for the tenor reached PHP 6.584 billion. The average rate of the three-month papers went up by 6.4 basis points (bps) to 6.15% from the 6.086% quoted for the tenor last week, with accepted rates ranging from 6.044% to 6.198%.

The government also made a partial PHP 2.67-billion award of the 182-day securities versus the PHP 5-billion program as bids reached just PHP 4.63 billion. The six-month T-bill was quoted at an average rate of 6.266%, up by 12.2 bps from 6.144% the previous week, with accepted rates from 6.11% to 6.293%.

Lastly, the BTr raised just PHP 3.595 billion via the 364-day debt papers out of the PHP 5 billion on the auction block, even as demand for the tenor reached PHP 6.205 billion. The average rate of the one-year T-bill rose by 6.7 bps to 6.286% from the 6.219% fetched last week. Accepted yields were from 6.18% to 6.375%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 6.1113%, 6.1815%, and 6.2175%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“The awarded T-bill rates [rose] this week as market participants reacted from the strong hawkish policy remarks by the US Federal Reserve and the European Central Bank (ECB) during the ECB forum in Sintra, Portugal last week,” a trader said in a Viber message.

Rates rose on expectations that the Fed could increase rates at its next two meetings, which could be matched locally, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

Leaders of the world’s top central banks reaffirmed on Wednesday they see further policy tightening as needed to tame stubbornly high inflation but still believe they can achieve that without triggering outright recessions, Reuters reported.

US Federal Reserve Chairman Jerome H. Powell did not rule out further hikes at consecutive Fed meetings, while European Central Bank President Christine Lagarde confirmed expectations the bank will raise rates in July, saying such a move was “likely.”

“Policy hasn’t been restrictive enough for long enough,” Mr. Powell told an annual gathering of central bankers hosted by the ECB in the Portuguese mountain resort of Sintra.

“I wouldn’t take moving in consecutive meetings off the table at all,” he said. The next rate-setting Federal Open Market Committee meeting is scheduled for July 25-26.

The US central bank last month paused its tightening cycle after hiking rates for 10 straight meetings by a total of 500 bps to a range between 5% and 5.25%.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) last month kept benchmark interest rates unchanged for a second straight meeting on expectations of easing inflation.

The BSP raised borrowing costs by 425 bps from May 2022 to March 2023. Its next policy review is on August 17.

On Tuesday, the BTr will auction off PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and two months.

The BTr wants to raise PHP 180 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 120 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