Gov’t partially awards T-bills as rates rise

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THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off yesterday as rates increased across-the-board following the uptrend in inflation and the possible uptick in global oil prices due to geopolitical tensions abroad.

The Bureau of the Treasury (BTr) raised P16.875 billion in T-bills out of its P20-billion program even as the auction was met with bids worth over P23 billion.

The Treasury fully awarded the 91-day papers even as the tenor fetched higher rates while they decided to partially award the 182- and 364-day bills.

Broken down, The government fully awarded the P6 billion it wanted to borrow via the 91-day T-bills at an average rate of 3.328%, 14.9 basis points (bps) higher than the 3.179% fetched during the last auction on Jan. 6.

On the other hand, the Treasury accepted just P4.85 billion in bids for the six-month papers out of the P6-billion program even as the tenor attracted bids worth P6.8 billion. The 182-day T-bills fetched an average rate of 3.587%, 15.2 bps more than the previous’ 3.435%.

Meanwhile, for the 364-day papers, the Treasury raised only P6.025 billion out of the P8-billion program as the tenor was undersubscribed, with tenders only reaching P7.425 billion. The one-year securities yielded an average rate of 3.896%, also 27.2 bps higher than the 3.624% fetched in last week’s auction.

Rates at the secondary market of the three-month, six-month and one-year papers stood at 3.261%, 3.429% and 3.732%, respectively, on Tuesday, based on the PHP Bloomberg Valuation Service Reference Rates.

Treasurer Rosalia V. de Leon said the one-year papers were slightly undersubscribed since investors are currently considering the duration risk for the tenor.

Ms. De Leon said the rates during the auction increased “because of the faster-than-expected December inflation and of course, ’yung (the) events both domestic and external.”

“First in the domestic, given ’yung happening (the impact of the) eruption of Taal (Volcano), so they would still have to see — everything is very fluid, watching what happens to the local economy of the affected areas. On the external front, (the) Iraq tensions (US-Iran), so we see also na (that global) oil prices (are) creeping up, that also adds up to what will be inflation for the coming months. So that’s being priced in, in the bids of today’s auction,” she told reporters after the auction on Tuesday.

Authorities raised Alert Level 4 due to the eruption of Taal Volcano on Monday. The ashfall was felt in the nearby provinces of Tagaytay, Laguna, Cavite, Rizal, Bulacan, and even in Metro Manila.

Work in government offices resumed on Tuesday after the previous day’s cancellation due to the ashfall, while classes remained suspended yesterday in Metro Manila.

The government reported last week that headline inflation picked up to 2.5% in December, averaging at the same rate in 2019. Last year’s headline inflation average fell within the 2-4% official target and was significantly slower compared to 2018’s 5.2% print.

However, economists flagged the conflict between US and Iran as possible risks to inflation this year as this may cause global oil prices to spike.

Sought for comment, a bond trader said the drivers for the auction were “the recent uptick in the (exchange of) dollar-peso. (Due to) weaker peso, the market bid higher. The (stronger) dollar brought about by the recent geopolitical tension in Iran (and US) and the high inflation trend (also contributed).”

Bloomberg reported Monday that the peso will likely remain weak, along with other currencies in the Southeast Asian nation, on the back of widening current account deficit, based on a report from the Goldman Sachs Group, Inc.

Meanwhile, Reuters reported on Monday that oil prices in the global market decreased by around one percent to $64.20 per barrel for the Brent crude and $58.08 for the West Texas Intermediate crude as the tension between US and Iran eased.

However, it said investors were now closely watching the US gasoline stocks which jumped by “9.1 million barrels in the week to Jan. 3,” at its highest in one week in four years.

The tension between the US and Iran when the a US air strike killed Iran’s top general last Jan. 3, to which Iran retaliated by firing off missiles at US forces in Iraq.


Meanwhile, Ms. De Leon said the Treasury is programmed to borrow $3.7 billion from external sources for the year, but they have yet to secure the necessary approvals from the concerned regulators.

Likewise, she said the BTr will still consider the issuance of retail Treasury bonds, as the sale of the debt papers “will always be on the menu.”

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. — B.M. Laforga