THE GOVERNMENT partially awarded the Treasury bills (T-bills) it auctioned off yesterday as rates increased across-the-board amid continued worries due to the Taal Volcano eruption, which has already been considered as an upside risk to inflation.

The Bureau of the Treasury (BTr) raised just P14.7 billion via the T-bills out of its P20-billion program, even as the auction fetched bids totaling P33.502 billion.

The Treasury fully awarded the three-month papers even as the tenor fetched higher rates, while opting to partially award the 182- and 364-day T-bills.

Broken down, the government fully awarded the P6 billion it wanted to borrow via the three-month T-bills at an average rate of 3.39%, 6.2 basis points (bps) higher than the 3.328% fetched during the last auction on Jan. 14. This, as the papers fetched bids totaling P13.927 billion, more than double the Treasury’s program.

On the other hand, the Treasury accepted just P3.02 billion in bids for the six-month papers out of the P6-billion program despite a total of P8.27 billion worth of bids seen yesterday. The average rate for the 182-day T-bills was at 3.652%, higher by 6.5 bps than the 3.587% seen a week ago.

For the 364-day papers, the Treasury raised only P5.685 billion out of the P8-billion program despite receiving P11.305 billion in tenders for the tenor. The one-year securities yielded an average rate of 3.971%, rising 7.5 bps from the 3.896% seen last week.

At the secondary market, yields on the three-month, six-month and one-year papers stood at 3.311%, 3.562% and 3.855%, respectively, on Monday, based on the PHP Bloomberg Valuation Service Reference Rates.

National Treasurer Rosalia V. de Leon said the impact of the disaster in Batangas is among the factors behind the auction results this week.

“Rates went up. That’s expected because right now, still, (it’s) very fluid because of the impact of volcanic eruption. We’re still on alert level 4,” she told reporters on the sidelines of the auction held in Manila on Monday.

Ms. De Leon said this although government officials, including the National Economic and Development Authority (NEDA) and Finance Secretary Carlos G. Dominguez III, have assured that there’s no need to be alarmed as other regions will be able to help offset losses in the affected areas.

“They see that inflation won’t go up significantly. But still, I think the banks are pricing in. Moving forward, even also the expectation for one-year [papers], it’s already at 2.9%,” she added.

This was echoed by a bond trader who said the higher yields fetched compared to the previous auction came after the eruption, “with risks to inflation feared to be titled on the upside amid Taal Volcano’s eruption.”

“Reinvestment requirements may have supported the auction further as there are maturing T-bills amounting to P21.9 billion on Jan. 22,” the bond trader added.

Last Friday, Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said inflation will likely remain stable despite the factored upside risk from the Taal Volcano eruption.

“The BSP expects inflation to stay on course in 2020,” the governor said. The central bank expects inflation to average “near the midpoint of the target band at 2.9%” for this year and in 2021, he said.

The government has set an inflation target of 2-4% for 2020 until 2022.

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