Gov’t partially awards Treasury bills with higher yields at auction

The government partially awarded Treasury bills it offered on Tuesday with higher yields, as investors await the US Federal Reserve’s next policy move.

The Treasury bureau raised PHP 13.608 billion as planned from the T-bills it auctioned off, with bids reaching PHP 20.049 billion.

It borrowed P3.608 billion from the PHP 5-billion program via the 91-day T-bills as tenders for the tenor reached PHP 4.618 billion.

The average rate of the three-month debt went up by 9.5 basis points (bps) to 5.922% from a week earlier. Accepted rates ranged from 5.75% to 6%.

Meanwhile, the government fully awarded PHP 5 billion in 182-day securities as bids reached PHP 7.72 billion. The six-month T-bill was quoted at an average rate of 5.978%, 8.7 bps higher than last week. Accepted rates were 5.85% to 6.05%.

The Treasury also raised PHP 5 billion from 364-day T-bills as demand reached PHP 7.811 billion. The average rate of the one-year T-bill rose by 8.2 bps to 6.062% from a week earlier. Accepted yields were 5.89% to 6.188%.

At the secondary market before Monday’s auction, the 91-, 182- and 363-day T-bills were quoted at 5.8631%, 5.9009% and 5.9482%, respectively, based on PHP Bloomberg Valuation Reference Rates provided by the Treasury.

“Results were mixed in today’s Treasury bill auction as the auction committee decided to fully award bids for the 182- and 363-day securities while partially awarding the 91-day T-bills,” the Treasury said in a statement.

The 91-day T-bill was capped at 5.922%. The auction was 1.3 times oversubscribed, attracting PHP 20 billion in tenders, it said. “With its decision, the committee raised PHP 13.6 billion of the PHP 15-billion total offering.”

“The higher T-bill rates were influenced by some market uncertainty over chances of a possible US policy rate hike this week,” a trader said in an e-mail.

Investors were expecting the Fed to hold its key rates amid a possible easing in US inflation, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The US central bank raised borrowing costs by 25 bps last month, bringing the Fed fund rate to 5-5.25%. It has increased borrowing costs by 500 bps since March 2022.

The Federal Open Market Committee will review policy on June 13-14.

Mr. Ricafort said the US inflation is expected to have eased to 4.1% in May from 4.9% in April. The Fed’s pause could be matched locally, he added.

The Bangko Sentral ng Pilipinas (BSP) paused its aggressive monetary tightening last month and signaled it would put the key rate on hold at its next two to three meetings.

The BSP raised policy rates by 425 bps from May 2022 to March 2023. The Monetary Board will review policy on June 22.

On Wednesday, the Treasury bureau will auction off PHP 25 billion in reissued 20-year Treasury bonds with a remaining life of 14 years and eight months.

It wants to raise PHP 185 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 125 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 economic output this year. — Aaron Michael C. Sy, Reporter