Gov’t fully awards T-bills amid strong demand

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday after several weeks of rejections and partial awards on the back of strong demand, despite expectations of rate hikes by the US Federal Reserve and Bangko Sentral ng Pilipinas (BSP) as inflation risks grow.

The Bureau of the Treasury (BTr) raised P15 billion as planned via the T-bills it auctioned off on Monday as total tenders reached P54.59 billion, almost three times as much as the initial offer.

Broken down, the BTr raised P5 billion as programmed via the 91-day T-bills at its auction on Monday as total tenders reached P29.350 billion. The average rate of the three-month debt dropped by 20.7 basis points (bps) to 1.380% from the 1.587% seen last week.

The government also raised P5 billion as planned from the 182-day securities as bids reached P14.17 billion. The average yield of the tenor went up by 17.4 bps to 1.781% from the 1.607% fetched at the previous auction.

Lastly, the BTr made a full P5-billion award of the 364-day T-bills as tenders reached P11.072 billion. The average rate of the one-year papers went up by 9.1 bps to 1.883% from the 1.792% fetched at the previous auction.

At the secondary market prior to the auction, the 91-, 182, and 364-day bills fetched rates at 1.3493%, 1.5347%, and 1.7434% respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon in a Viber message to reporters said that the Treasury “finally” made a full award, with the rate of the 91-day tenor dropping amid heightened demand.

Ms. De Leon added that the higher rates for the 182- and 364-day tenors were due to a “higher inflation forecast this year” and as the BSP said it could start normalizing its pandemic-driven accommodative stance within the year, just like the Fed is doing.

A bond trader in a Viber message said investors want increased yields for longer tenors as they expect higher interest rates after six months. The trader added that investors are also looking ahead to March inflation data to be released on Tuesday for more cues.

BSP Governor Benjamin E. Diokno last week signaled the key policy rate could reach up to 2.75% by next year.

The central bank has kept its key rate untouched for the 11^th straight meeting last month despite warning that its inflation target might be breached this year due to surging global oil prices brought by the Russia’s invasion of Ukraine.

At that meeting, the BSP said they now expect inflation to average 4.3% this year, above the 2-4% target and faster than the previous 3.7% estimate. The central bank also raised its inflation forecast for next year to 3.6% from 3.3%.

Analysts said headline inflation likely accelerated in March as the surge in global oil prices amid the Russia-Ukraine war caused faster increases in food and transport costs.

A BusinessWorld poll of 18 analysts yielded a median estimate of 4% for last month’s inflation, nearer the upper end of the central bank’s 3.3% to 4.1% projection.

If realized, this would be faster than the 3% in February and would match the upper end of the 2-4% target of the BSP. Still, it would be slower than the 4.5% seen a year earlier.

The Philippine Statistics Authority will release March inflation data today (April 5).

Central banks around the world have been tightening their monetary policies to temper inflation even in the face of risks to economic growth.

The Fed hiked its policy rates for the first time since 2018 by 25 bps last month to combat its surging inflation that reached a 40-year high. It also signaled more aggressive hikes in the coming meetings.

The BTr is planning to raise P200 billion from the domestic market in April, or P60 billion through T-bills and P140 billion via Treasury 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. — Tobias Jared Tomas