Gov’t partially awards T-bills

THE GOVERNMENT partially awarded the Treasury bills (T-bills) it offered on Monday as yields continued to rise amid expectations of more aggressive rate hikes from the US Federal Reserve.

The Bureau of the Treasury (BTr) only awarded P5 billion in 91-day T-bills at its auction on Monday even as total tenders reached P35.804 billion, over two times as much as the P15-billion program.

The government raised P5 billion as planned via the 91-day securities as bids reached P17.802 billion. The average rate of the tenor went up by 5.1 basis points (bps) to 1.587% from 1.536% last week.

Meanwhile, the BTr did not award 182-day T-bills even as tenders reached P9.4 billion versus the P5-billion program. Had the government made a full award, the average rate of the six-month paper would have gone up by 24.9 bps to 1.856% from the 1.607% fetched at the previous auction.

The government also rejected P8.602 billion in bids for the 364-day debt against the P5-billion plan. Has the BTr fully awarded its offer, the average rate of the one-year T-bill would have increased by 37.5 bps to 2.137% from the 1.792% quoted for the tenor last week.

At the secondary market prior to the auction, the 91-, 182, and 364-day bills fetched rates at 1.3212%, 1.5266%, and 1.7378% respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon said in a Viber message to reporters that the government made a partial award of its offer as T-bill yields continued to climb amid “market jitters” due to bets of aggressive US Federal Reserve rate hikes to curb rising inflation.

A trader said rates of the 182- and 364-day papers were high as investors want higher yields amid growing inflation risks here and abroad.

The US central bank must move “expeditiously” to bring too-high inflation to heel, US Federal Reserve Chair Jerome H. Powell said last week, adding that it could use bigger-than-usual interest rate hikes if needed to do so, Reuters reported.

In particular, he added, “if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 bps at a meeting or meetings, we will do so.”

The US consumer price index was at 7.9% year on year in February, the fastest in four decades. Inflation risks have been growing due to the ongoing war between Russia and Ukraine, which has caused prices of oil and other commodities to spike.

However, oil prices slid on Monday as a nine-day coronavirus lockdown in Shanghai hit economic activity, Reuters reported. The spread of restrictions in the world’s biggest oil importer saw Brent skid $3.39 to $117.26, while US crude fell $3.41 to $110.49.

Ms. De Leon said the BTr’s recent dollar bond issue puts the government in a “stronger position to meet disbursements, even amid rejections.” She added that investors are more inclined to put their cash at the belly of the curve as they want higher yields.

The Treasury raised $2.25 billion from its first triple tranche US dollar-denominated bond offering last week, which included its first-ever green bonds, despite heightened market volatility from the Russia-Ukraine crisis and the start of the US Federal Reserve’s policy tightening cycle.

The government raised $1 billion from the inaugural 25-year green bond offer, as well as $500 million from five-year bonds, and $750 million from 10.5-year bonds.

The BTr wants to raise P250 billion from the domestic market this month, or P75 billion though T-bills and P175 billion from Treasury bonds. However, it has made several rejections and partial awards at its auctions due to rising yields.

Monday’s T-bill auction was the last one for March. The Treasury only raised P28.04 billion via T-bills out of the P75-billion program.

The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — T.J. Tomas with Reuters