Gov’t partially awards T-bills at higher rates after BSP decision

THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it auctioned off on Monday as investors sought higher yields after the central bank hiked benchmark interest rates anew last week.

The Bureau of the Treasury (BTr) raised just PHP 8.553 billion from its offer of T-bills on Monday, below the PHP 15-billion program, even as total bids reached PHP 23.252 billion.

Broken down, the Treasury made a partial PHP 1.428-billion award of the 91-day T-bills versus the PHP 5-billion program, even as tenders for the tenor totaled PHP 6.038 billion. The average rate of the three-month paper rose by 23.80 basis points (bps) to 5.149% from the 4.911% seen during last week’s auction, with the Treasury only accepting bids with this yield.

The government likewise borrowed just PHP 2.125 billion via the 182-day securities, lower than the PHP 5-billion plan, despite demand for the tenor reaching PHP 5.635 billion. The six-month T-bill was quoted at an average rate of 5.677%, climbing by 12.10 bps from 5.556% the previous week, with accepted rates ranging from 5.65% to 5.693%.

Lastly, the BTr raised PHP 5 billion as planned from the 364-day debt papers as bids for the tenor reached PHP 11.579 billion. The average rate of the one-year paper went up by 14.70 bps to 5.987% from the 5.864% fetched last week. Accepted yields were from 5.95% to 6.023%.

At the secondary market on Monday, the 91-, 182-, and 364-day T-bills were quoted at 4.9666%, 5.5587%, and 5.9397%, respectively, based on PHP Bloomberg Valuation 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 364-day T-bill while partially awarding the 91 – and 182-day securities. The 364-day T-bill fetched an average rate of 5.987% while the 91- and 182-day securities were capped at 5.149% and 5.677%, respectively,” the BTr said in a statement on Monday.

“The auction was 1.6 times oversubscribed, attracting PHP 23.3 billion in total tenders. With its decision, the committee raised PHP 8.6 billion of the PHP 15-billion total offering,” it added.

The increase in T-bill rates on Monday came following the 25-bp hike by the Bangko Sentral ng Pilipinas (BSP) last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Investors continue to demand higher yields, especially for the three- to six-month papers, as the market looks at the policy rate for comparison,” a trader said in a Viber message.

“Since the policy rate is at 6.25% already, some investors would like to lend to the government closer to that, if not higher. So, the one-year paper is the only T-bill space able to reach that,” the trader added.

The trader said the Treasury is likely look to capitalize on market liquidity to lengthen the maturity of its borrowings as the yield curve remains flat.

The BSP’s policy-setting Monetary Board last week hiked benchmark interest rates by 25 bps as inflation remains elevated, bringing its key rate to 6.25%.

The move was a step down from two straight 50-bp increases made in the preceding meetings.

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

Its next rate-setting meeting is on May 18.

Headline inflation slowed to 8.6% in February from the 14-year high of 8.7% in January.

For the first two months of the year, inflation averaged 8.6%, well above the BSP’s 2-4% target and 6% forecast for the year.

Monday’s auction was the Treasury’s last offering of T-bills for March. It raised a total of PHP 51.7 billion out of the PHP 75-billion program for the month as it made partial awards at all five auctions.

On Tuesday, the BTr will offer PHP 25 billion in reissued seven-year Treasury bonds that have a remaining life of six years and six months.

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. — A.M.C. Sy