Gov’t partially awards fresh 3-year bonds

THE GOVERNMENT partially awarded the fresh Treasury bonds (T-bonds) it offered on Tuesday as investors asked for higher yields in anticipation of a central bank hike in the second half.

The Bureau of the Treasury (BTr) raised just P25.791 billion via the fresh three-year T-bonds it auctioned off on Tuesday, less than the programmed P35 billion, even as tenders reached P53.578 billion.

The debt papers were awarded at a coupon rate of 4.25%, 19.48 basis points higher than the 4.0552% quoted for the three-year debt at the secondary market before the auction, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website. The BTr capped bids at 4.37%.

National Treasurer Rosalia V. de Leon said in a Viber message to reporters that the government made a partial award of the papers as the market was defensive following data released on Tuesday, which showed headline inflation hit a six-month high in March.

Rising inflation could give the Bangko Sentral ng Pilipinas (BSP) a reason to push through with its plan to begin dialing back its pandemic-driven easy monetary policy.

“The results of the auction were in line with expectations. The market continues to seek higher yields in anticipation of a rate hike by the BSP sooner rather than later,” a trader said in a Viber message.

A second trader said the coupon fetched for the three-year bond was within the expected range.

“It is understandable that the market was defensive especially as CPI (consumer price index) touches the high end of BSP’s target,” the second trader added.

Inflation rose to a six-month high in March as food, utilities, and transport costs increased amid a spike in global oil prices due to Russia’s invasion of Ukraine.

Preliminary data released by the Philippine Statistics Authority on Tuesday showed headline inflation hit 4% last month, faster than the 3% in February but slightly slower than the 4.1% print in March last year.

This matched the 4% print in October last year and is the fastest since the 4.2% inflation in September 2021. It also matched the 4% median in a BusinessWorld poll conducted last week and was near the upper end of the 3.3-4.1% forecast of the central bank for the month.

For the first quarter, inflation settled at 3.4%, within the BSP’s 2-4% target for the year.

BSP Governor Benjamin E. Diokno last week signaled the key policy rate could reach up to 2.75% by next year.

Following the release of March CPI data, Mr. Diokno said the BSP is ready to take preemptive action to anchor inflation expectations.

The central bank kept its key rate untouched for the 11th straight meeting last month despite warning that its inflation target might be breached this year due to surging global oil prices brought by the Russia’s invasion of Ukraine.

The BTr wants to raise P200 billion from the local market in April, or P60 billion through Treasury bills and P140 billion via T-bonds.

The government borrows from domestic and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — Tobias Jared Tomas