Gov’t partially awards T-bill offer as rates climb

THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off on Monday as investors wanted higher yields and as its recent retail Treasury bond (RTB) offering siphoned off liquidity from the market.

The Bureau of the Treasury (BTr) raised just P7.068 billion from the T-bills it auctioned off on Monday, lower than the P15-billion program, even as bids reached P26.653 billion.

Last week, the government did not award any T-bills as rates climbed after the US Federal Reserve chief said rates in the world’s largest economy could remain elevated for longer. Tenders at that auction reached P17.289 billion, higher than the P15-billion plan.

Broken down, the Treasury borrowed just P4.543 billion from the 91-day securities on Monday versus the P5-billion plan, even as the tenor attracted P10.923 billion in bids. The average rate of the tenor went up by 24.8 basis points (bps) to 2.318% from the 2.07% fetched on Aug. 22 or the last successful award. Accepted rates ranged from 1.975% to 2.4%.

The BTr likewise raised only P2.525 billion from the 182-day debt papers out of the P5-billion program, even with demand for the tenor reaching P10.629 billion. The debt paper’s average rate rose by 14.9 bps to 3.485% from 3.336% fetched at the previous successful auction as the government accepted offers ranging from 3.435% to 3.5%.

Meanwhile, the government rejected all bids for 364-day securities on offer on Monday, even as tenders reached P5.101 billion. Had they been fully awarded, the average rate of the tenor would have gone up by 57.4 bps to 4.356% from the 3.782% fetched for the last award.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 2.383%, 3.3304%, and 3.8911%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The BTr made a partial award of the T-bills on Mondays as the rates sought by investors were “way above current levels,” National Treasurer Rosalia V. de Leon told reporters in a Viber message after Monday’s auction.

“Nothing surprising because the BTr still has leeway to reject T-bills following its RTB issuance,” the first trader said.

The first trader said the market wanted higher yields amid expectations of elevated inflation, which could lead to another aggressive rate hike from the Bangko Sentral ng Pilipinas (BSP).

The second trader said T-bill yields climbed as liquidity was mopped up by the government’s RTB offer that ended last week, resulting in tepid bids from banks.

A BusinessWorld poll of 13 analysts yielded a median estimate of 6.4% for August headline inflation, well within the BSP’s 5.9-6.7% forecast for the month and unchanged from July pace.

However, if realized, this would mark the fifth straight month that inflation would go beyond the central bank’s 2-4% target and would also be above its 5.4% forecast for the year.

BSP Governor Felipe M. Medalla last week said the Fed’s next policy move will be a “big factor” to consider for the Monetary Board at their Sept. 22 meeting as the US central bank’s review will happen on Sept. 20-21.

The BSP has increased borrowing costs by 175 bps since May as it seeks to rein in rising inflation. 

Fed Chair Jerome H. Powell said at the Jackson Hole symposium on Aug. 26 that the US central bank will hike interest rates as needed and keep them high for some time to bring inflation back within target. The US central bank has raised rates by 225 bps so far since March.

Meanwhile, the Treasury raised a total of P420.448 billion from the 5.5-year retail bonds it offered from Aug. 23 to Sept. 2, with P108.517 billion coming from the bond exchange program. The RTBs carry a coupon of 5.75% and will be issued on Sept. 7.

On Tuesday, the BTr will auction off P35 billion in reissued 3.5-year Treasury bonds (T-bonds) with a remaining life of three years and five months.

The Treasury wants to raise P200 billion from the domestic market this month, or P60 billion through T-bills and P140 billion via T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at P1.65 trillion this year, equivalent to 7.6% of gross domestic product. — Diego Gabriel C. Robles