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THE GOVERNMENT partially awarded the Treasury bills (T-bills) it offered on Monday as investors asked for higher returns due to high inflation and following the central bank’s rate hike.

The Bureau of the Treasury (BTr) awarded just P8.5 billion in T-bills at its auction on Monday even as total tenders reached P36.545 billion, over twice as much as the P15-billion program.

Broken down, the government raised P5 billion as programmed through the 91-day T-bills as tenders for the tenor reached P21.63 billion. The average rate of the three-month debt was at 1.675%, 21.23 basis points (bps) higher than the 1.4627% seen at the secondary market prior to the auction. The government did not award any T-bill tenors last week.

Meanwhile, the Treasury partially awarded the 182-day securities, raising just P3.5 billion versus the P5-billion plan even as bids reached P10.6 billion. The average yield on the six-month T-bill was at 1.892%, 13.67 bps higher than the 1.7553% fetched for the tenor at the secondary market

Lastly, the BTr rejected all bids for the one-year T-bills as demand only reached P4.32 billion, below the P5-billion program. Had the government fully awarded its offer, the average rate for the one-year tenor would have soared to 2.93%, 91.81 bps higher than the 2.0119% fetched at the secondary market prior to the auction.

National Treasurer Rosalia V. de Leon said in a Viber message to reporters that the BTr made a partial award of its offer as rates were high due to the market being defensive amid high inflation, the Bangko Sentral ng Pilipinas’ (BSP) decision to hike borrowing costs and with the government making partial awards or full rejections at its recent auctions.

Ms. De Leon noted that the highest bid for the 364-day T-bill reached 3.925%.

The “364-day primary rates last breached 3% when it averaged 3.371% last April 2020. Inflation then was 1.8% coming from 2.2% for the previous month,” she said.

A trader said in a Viber message that the lack of demand for longer-dated T-bills in recent auctions may cause the BTr to issue higher volumes of shorter tenors next month.

Investors do not want to keep their cash locked in government debt for longer periods and with minimal yield amid persisting uncertainties here and abroad.

Last week, the BSP raised benchmark interest rates for the first time since 2018 to tame rising inflation.

The Monetary Board on Thursday increased the key policy rate by 25 bps to 2.25%. Interest rates on the overnight deposit and lending facilities were also hiked by 25 bps to 1.75% and 2.75%, respectively.

Inflation climbed to 4.9% in April, the highest in more than three years, as oil and commodity prices soared amid the Russia-Ukraine war and supply chain disruptions.

At the meeting, the central bank upwardly revised its average inflation forecast for 2022 to 4.6% from the previous forecast of 4.3%, exceeding the 2-4% target band. For 2023, the BSP’s inflation forecast was hiked to 3.9% from 3.6% previously.

The start of the BSP’s tightening cycle came a week after the release of data showing gross domestic product (GDP) expanded by a better-than-expected 8.3% in the first quarter.

Monday’s T-bill auction was the last one for the month. The government only borrowed P26.1 billion via the shorter-dated papers versus the P60-billion program for May.

The BTr is offering reissued 10-year Treasury bonds that have a remaining life of nine years and eight months on Tuesday for its last auction of longer-dated papers in May.

The government borrows from local and external sources to help plug a budget deficit capped at 7.7% of GDP this year. — T.J. Tomas