Gov’t partially awards T-bills as rates rise

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THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it auctioned off yesterday as the rate of the one-year papers rose ahead of inflation data and amid escalating tensions overseas.

The Bureau of the Treasury (BTr) raised P19.104 billion on Monday via the T-bills it offered out of the P20-billion program, partially awarding the one-year papers as banks asked for sharply higher yields.

The auction was met with strong demand as it attracted total bids of P26.8 billion, higher than the P20-billion offer.

The Treasury accepted P6 billion as planned via the 91-day papers out of P9.967 billion worth of bids at an average rate of 3.179%, 1.3 basis points (bps) lower compared to the 3.192% fetched during the Dec. 2 auction

The government likewise raised P6 billion as programmed via the 182-day T-bills out of the P8.28-billion tenders. The three-month papers yielded an average rate of 3.435%, inching up by 8.7 bps than the previous’ 3.348%.

Meanwhile, for the 364-day papers, the Treasury only accepted P7.104 billion in bids, failing to fill the P8-billion program even as tenders totaled P8.55 billion. The one-year securities fetched an average rate of 3.624%, higher by 14.9 bps than the 3.475% previously.

At the secondary market on Monday, the T-bills ended with rates of 3.212%, 3.411% and 3.509% for three-month, six-month and one-year papers, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

National Treasurer Rosalia V. de Leon said after the auction that rates on most papers went up amid escalating tensions between the US and Iran after the former launched an air strike Friday last week, which killed Iranian major-general Qassem Soleimani. This has pushed global oil prices higher.

“Except for the 91-day, rates went up and obviously you know the reasons, that emerged following the (death) of Iranian general (and with) the brewing tension now between US and Iran — of course that’s also going to affect in terms of prices of oil,” Ms. De Leon told reporters Monday.

For Kevin S. Palma, peso debt trader at Robinsons Bank Corp., “yields of the bills came in mixed as the heightened geopolitical tensions between the US and Iran as well as elevated oil prices dampened investor enthusiasm for emerging market assets.”

Agence France-Presse reported last week that global oil prices surged by as much as four percent following reports that the top Iranian general was killed, “as investors grow increasingly worried about the effects of a possible flare-up in the tinderbox Middle East on supplies of the commodity.”

On Monday, Reuters said Brent oil increased two percent to reach $70 a barrel with escalating geopolitical tensions between the US, Iran, and within the Middle East.

It said US President Donald J. Trump threatened over the weekend that he will impose sanctions on Iraq if the US troops will be forced to withdraw, after Baghdad “called on American and other foreign troops to leave Iraq.”

Meanwhile, Ms. de Leon said the effect of rising oil prices may be aggravated by the scheduled increase in taxes on several goods set by the Tax Reform for Acceleration and Inclusion (TRAIN) Act that was implemented on Jan. 1.

She said the market is also waiting for inflation data for December and for full-year 2019, which will be released by the Philippine Statistics Authority today.

A BusinessWorld poll of 13 economists bared a 2.1% median estimate for December headline inflation, well within the central bank’s forecast range 1.8-2.6% for the month.

“Altogether, these were inputted in terms of the rates of the T-bills during the auction and that’s expected so we had to cut, temper in terms of the rate for the one-year paper so it’s a partial award decided by the auction committee,” she said.

Meanwhile, she said the BTr is still currently seeking the necessary approvals for its offshore bond issuances.

“Right now, we have not made any scheduled decisions in terms of the timing, but obviously we are also working [on] our approvals already. So once we see good signal from the market, then definitely we will grab that opportunity and have a good window for another issuance for the start of the year,” Ms. De Leon said.

“If you recall, we were not signaling anything that we are really going to do the dollar [bond issue] — the usual, the conventional approach that we do. So for this year, we’re really focused on our onshore issuances,” she added.

However, given rising geopolitical tensions abroad, she said they are still monitoring the market.

“We’ll have to see in terms of…investor appetite and risk-off mode. Obviously, if we see that there’s really that kind of risk on investors, then we will not really be proceeding. But what we’d be doing is really to monitor the market,” she said.

She said the Treasury is also expecting maturities this week worth P22 billion.

Today, the BTr will offer P30 billion in reissued three-year Treasury bonds (T-bonds) with a remaining life of two years and five months.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via T-bonds

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — Beatrice M. Laforga