T-bill bids rejected as investors ask for high rates

THE BUREAU of the Treasury (BTr) rejected all bids for its offer of Treasury bills (T-bills) for the second straight week as investors continued to ask for higher rates.

Tenders for the T-bills the government offered on Monday reached P21.23 billion, higher than the BTr’s plan to raise P15 billion through the short-term papers.

Broken down, bids for the 91-day securities reached P7.61 billion, higher than the P5-billion plan. Had the Treasury made a full award, the three-month debt papers would have fetched an average rate of 1.577%, surging by 67.8 basis points (bps) from the 0.899% seen the last time the BTr borrowed the full amount.

The BTr also rejected the P6.46 billion in tenders for the 182-day securities even as this was higher than the programmed P5 billion. The average rate of the six-month T-bill would have gone up by 81 bps to 1.967% from 1.157% previously had the government made a full award.

Lastly, the government turned down P7.17 billion in bids for the 364-day debt papers from an initial offer of P5 billion. If the tenor was fully awarded, the average yield on the one-year instrument would have stood at 1.943%, jumping by 37.5 bps from the 1.568% fetched previously.

At the secondary market prior to the auction on Monday, the 91- 182- and 364-day T-bills were quoted at 1.1685%, 1.2493% and 1.5943%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

“Full rejection for all tenors as markets continue to ask for higher risk premium with deterioration in market sentiment with escalating tension in Ukraine,” National Treasurer Rosalia V. de Leon said in a Viber message to reporters.

Negative market sentiment was caused by the weakening of the peso and the expected surge in inflation, she said.

A trader likewise said the market is concerned about inflation as oil prices surge.

“Investors may also be positioning ahead of the US Fed meeting next week as the magnitude of its rate hike continues to be speculated,” the trader said via Viber.

US Federal Reserve Chairman Jerome H. Powell last week said Russia’s invasion of Ukraine has not changed the central bank’s plans to start raising interest rates this month, Reuters reported.

Inflation was at 3% for the second consecutive month in February, easing from the 4.2% a year earlier.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said the war between Russia and Ukraine could continue to heighten local oil prices, with sustained hikes possibly causing inflation to again exceed the central bank target range of 2% to 4%.

Inflation could breach the target if crude oil prices average higher than $95 per barrel in 2022 and 2023, he said.

Brent crude surged over $100 per barrel for the first time since 2014 after Russia invaded Ukraine on Feb. 24.

Meanwhile, the peso continued to depreciate on Friday, closing at P51.74 versus the dollar. This was weaker than its P51.50 finish on Thursday and its P51.34 close on Feb. 24 on oil supply concerns from the market.

On Tuesday, the BTr will auction off P35 billion in fresh seven-year Treasury bonds (T-bonds).

The BTr plans to raise P250 billion from the domestic market this month, or P75 billion via T-bills and P175 billion from T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — Jenina P. Ibañez with Reuters