THE GOVERNMENT partially awarded its offer of Treasury bills (T-bills) on Monday at mostly higher rates on expectations that the Bangko Sentral ng Pilipinas (BSP) will raise borrowing costs more aggressively at its next meeting.
The Bureau of the Treasury (BTr) raised P13.16 billion from its auction of T-bills on Monday, lower than the P15-billion program, even with bids reaching P36.72 billion or more than twice the planned amount.
Broken down, the Treasury made a full P5-billion award of 91-day securities as the tenor attracted P24.56 billion in bids. The average rate of the tenor went down by 3.2 basis points (bps) to 1.876% from the 1.908% fetched at the previous auction. Accepted rates ranged from 1.825% to 1.894%.
Meanwhile, the BTr raised just P4.1 billion from the 182-day debt papers out of the P5-billion program, even with total tenders reaching P7.05 billion. The tenor’s average rate went up by 29.9 bps to 2.907% from the 2.608% fetched for a full award last week, with the government accepting offers ranging from 2.825% to 2.95%.
Lastly, the government awarded only P4.06 billion in 364-day debt papers out of the P5-billion plan, with bids reaching P5.11 billion. The average rate of the one-year tenor climbed by 17 bps to 2.981% from the 2.811% seen at last week’s auction, with the yields on the awarded bids within the 2.8% to 3.143% band.
The last time the rate for the one-year tenor breached 3% was in April 2020 when it averaged 3.371% amid slower inflation, National Treasurer Rosalia V. de Leon told reporters in a Viber message. Demand for government debt was also high that month due to uncertainties brought about by strict coronavirus lockdowns.
At the secondary market prior to Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 1.8515%, 2.3971%, and 2.6928%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.
Ms. De Leon said the government made a partial award of its offer of six-month and one-year T-bills on Monday at rates “based on BTr reasonableness test, including guidance from BSP on path of rate hike.”
A trader likewise said yields on the longer T-bill tenors climbed as the market anticipates a 50-bp hike from the BSP at the Monetary Board’s Aug. 18 meeting following signals from the central bank chief.
BSP Governor Felipe M. Medalla last week said the central bank is prepared to raise benchmark rates by 50 bps at their Aug. 18 meeting to keep inflation in check after the peso on Thursday breached the P56 level against the dollar to move closer to its record low.
He said the US central bank’s hawkish stance has placed “strong depreciation pressures” on global currencies such as the peso, which adds to inflation risks.
The peso closed at P56.06 versus the dollar on Thursday, down by 39 centavos or 0.7% from the previous day, data from the Bankers Association of the Philippines showed. This was the peso’s worst finish since Sept. 27, 2005’s P56.30 a dollar and just 39 centavos away from the record low of P56.45 on Oct. 14, 2004.
The Monetary Board has raised benchmark interest rates by a total of 50 bps so far this year via back-to-back 25-bp hikes at their May 19 and June 23 meetings, bringing the overnight reverse repurchase facility or policy rate to 2.5%.
A 50-bp hike at the August meeting will bring the BSP’s key rate to 3%. Mr. Medalla last week said the BSP may need to raise borrowing costs by at least 100 bps more this year to bring the policy rate higher than the midpoint of its 2-4% inflation target.
Headline inflation reached 6.1% in June, the fastest in nearly four years. This brought the first-half average to 4.4%, above the 2-4% goal but still lower than the central bank’s 5% forecast for this year.
On Tuesday, the BTr will auction off P35 billion in 10-year Treasury bonds (T-bonds) with a remaining life of six years and six months.
The Treasury wants to raise P200 billion from the domestic market in July, or P60 billion through T-bills and P140 billion via T-bonds.
The government borrows from local and external sources to help fund a budget deficit capped at P1.65 trillion this year, equivalent to 7.6% of gross domestic product. — Diego Gabriel C. Robles