T-bills partially awarded as yields jump past 5%

THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it offered on Monday as yields jumped past the 5% level amid continued market caution on concerns that the prolonged Middle East war would stoke inflation.

The Bureau of the Treasury (BTr) raised just P19.2 billion via the T-bills it auctioned off, below the P27-billion program even as total tenders reached P36.78 billion, higher than the P31.5 billion in bids recorded last week.

Broken down, the government borrowed P9 billion as planned through the 91-day T-bills as demand for the tenor reached P16.613 billion. The three-month paper fetched an average rate of 5.004%, climbing by 10.4 basis points (bps) from 4.9% last week. Bids accepted had yields ranging from 4.945% to 5.004%.

The Treasury likewise raised the programmed P9 billion via the 182-day debt as tenders reached P13.83 billion. The average rate of the six-month T-bill was at 5.032%, rising by 8.4 bps from 4.948% previously. Tenders awarded carried rates from 4.999% to 5.125%.

Meanwhile, the BTr raised just P3.705 billion from the 364-day securities, below the P9-billion plan as bids totaled just P6.305 billion. The one-year paper’s average yield was at 5.166%, up by 10 bps from 5.066% last week. Accepted bids had rates from 5.1% to 5.25%.

The Treasury said it made a partial award to cap the rise in the one-year tenor’s average yield.

At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 4.9813%, 4.9581%, and 5.0886%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The T-bill auction drew higher demand than last week and some bills were fully awarded except the 364-day bill. As expected, yields were a little higher due to inflationary worries amid the Middle East war,” a trader said by telephone.

T-bill yields rose as oil prices continued to surge, fueling concerns over increasing costs that could lead the Bangko Sentral ng Pilipinas (BSP) to consider a rate hike, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The BSP said last week that it is closely monitoring the impact of the escalating Middle East war on inflation and the broader economy.

The Monetary Board will next meet to discuss its policy stance on April 23. In February, the central bank cut benchmark borrowing costs by 25 bps for a sixth straight meeting to bring its policy rate to 4.25%.

It has now delivered a total of 225 bps in cuts since it began easing in August 2024.

BSP Governor Eli M. Remolona, Jr. earlier said that headline inflation could breach 4% if oil hits $100 a barrel, adding that if fuel prices rise sharply and persistently, they could be forced to tighten their policy stance. The Monetary Board last hiked borrowing costs in October 2023.

Finance Secretary and Monetary Board Member Frederick D. Go also said last week that a prolonged surge in oil prices due to the Middle East war could prompt the Monetary Board to raise borrowing costs as early as next month.

Iran will attack Israel’s power plants and plants supplying US bases in the Gulf if President Donald J. Trump carries out his threat to “obliterate” Iran’s power network, the country’s Revolutionary Guards said in a statement on Monday, Reuters reported.

Iranian attacks have effectively closed the Strait of Hormuz, which carries a fifth of global oil and liquefied natural gas, causing the worst oil crisis since the 1970s.

On Monday, Brent crude futures rose 65 cents to $112.84 a barrel by 0446 GMT. US West Texas Intermediate was at $98.75 a barrel, up 84 cents. Both contracts were down more than $1 earlier in the session.

On Tuesday, the government is targeting to raise up to P40 billion from a dual-tenor Treasury bond (T-bond) offering or P10 billion to P20 billion each in reissued seven year T-bonds with a remaining life of three years and one month and 25-year securities with a remaining life of 23 years and 10 months.

The Treasury wants to raise P248 billion from the domestic market this month, or P108 billion in T-bills and P140 billion in T-bonds.

The government borrows from local and foreign sources to help finance its fiscal deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy with Reuters