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Gov’t fully awards T-bill offer despite higher rates

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THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday even as rates increased across the board after months of decline due to faster inflation and rising US bond yields.

The Bureau of the Treasury (BTr) raised P20 billion as planned via the T-bills on Monday as total bids reached P50.051 billion, making the offer over twice oversubscribed.

The BTr also opened its tap facility to raise another P5 billion via the one-year instruments.

Broken down, the Treasury raised P5 billion as planned from the 91-day debt papers, with total tenders reaching P12.613 billion. The three-month papers fetched an average rate of 0.875%, up by three basis points (bps) from the 0.845% seen at last week’s auction.

The BTr also borrowed the programmed P5 billion via the 182-day T-bills from P13.127 billion in bids. The average yield of the six-month instruments inched up by 2.1 bps to 1.067% from last week’s 1.046%.

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Lastly, the government made a full P10-billion award of the 364-day securities on offer as demand for the tenor hit P24.311 billion. The one-year T-bills were quoted at 1.527%, jumping by 11.1 bps from the 1.416% fetched previously.

National Treasurer Rosalia V. de Leon said the sudden increase in T-bill rates reflected a correction after US bond yields continued to rise.

Bonds have been bruised by the prospect of a stronger economic recovery and yet greater borrowing as US President Joseph R. Biden’s $1.9-trillion stimulus package progresses, Reuters reported.

Yields on 10-year Treasury notes have already reached 1.38%, breaking the psychological 1.30% level and bringing the rise for the year so far to a steep 43 bps.

The yield on the benchmark 10-year Treasury note, which rises when bond prices fall, climbed to a one-year high of 1.36% last week, fueled by expectations that progress in the countrywide vaccination program and additional fiscal stimulus would further spur economic growth.

Meanwhile, back home, a bond trader said the higher T-bill rates fetched on Monday show investors are now becoming more cautious over the possible impact of accelerating inflation.

“[It’s] telling that CPI (consumer price index) worries are now affecting end-users’ demand. Liquidity is still there but rates are moving towards more rational levels,” the trader said via Viber, adding rates may rise further in the coming auctions.

Headline inflation quickened to a two-year high of 4.2% in January as food and transport prices continued to spike.

However, despite expectations of a further increase in inflation in the coming months, the Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board on Feb. 11 kept its benchmark interest rates unchanged at their current record lows to support the economy’s recovery.

Still, it raised its average inflation forecast for the year to 4%, the upper end of its 2-4% target, from 3.2% previously. Meanwhile, the BSP lowered its forecast for next year to 2.7% from 2.9% previously.

The Treasury this month raised P127 billion from the local debt market, more than its P110-billion borrowing program for February, as the government opened its tap facility several times to take advantage of lower rates.

It was originally set to borrow P140 billion via T-bills and Treasury bonds (T-bonds) in February but it canceled a scheduled offering of P30 billion worth of three-year papers to give way to its retail Treasury bond (RTB) sale.

Of the total, P97 billion was raised via weekly T-bill auctions, breaching the P80-billion program. Meanwhile, it borrowed P30 billion as planned via T-bonds.

The government is selling three-year RTBs until March 4, unless the offer period is closed earlier. The bonds carry a coupon rate of 2.375% and are being sold for a minimum investment of P5,000.

The Treasury sold an initial P221.218 billion in RTBs at the rate-setting auction held on Feb. 9.

The government is looking to borrow P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — B.M. Laforga

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