THE GOVERNMENT partially awarded the Treasury bills (T-bills) it offered on Tuesday as yields continued to rise due to higher-than-expected inflation, which fueled expectations of an earlier rate hike from the Bangko Sentral ng Pilipinas (BSP).
The Bureau of the Treasury (BTr) only awarded P5 billion in T-bills at its auction on Tuesday even as total tenders reached P19.984 billion, slightly over the P15-billion program.
The government raised P5 billion as planned via the 91-day securities as bids reached P9.009 billion. The average rate of the tenor climbed by 25.9 basis points (bps) to 1.531% from 1.272% last week.
Meanwhile, the BTr rejected all offers for 182-day T-bills even as tenders reached P6.4 billion versus the P5-billion program. Had the government made a full award, the average rate of the six-month paper would have soared by 53 bps to 2.165% from the 1.635% fetched at the previous auction.
The government likewise did not award any 364-day debt despite demand for the tenor reaching P8.602 billion against the P5-billion offer. If the BTr had made a full award, the average rate of the one-year T-bill would have climbed by 39.6 bps to 2.329% from the 1.933% quoted last week.
At the secondary market prior to the auction, the 91-, 182, and 364-day T-bills fetched rates of 1.2616%, 1.6243%, and 1.9823% 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 partial award was due to April inflation data that “continues to dampen market sentiment.”
The first trader said markets remained defensive “given hawkish [US Federal Reserve] guidance and possibility of a hike in next week’s Monetary Board meeting,” due to higher-than-expected inflation in April.
“GDP [data] is about to be released for the week and that may solidify chances of BSP hike sooner rather than later,” the second trader added.
Inflation surged to an annual 4.9% in April, the highest in more than three years as soaring food and energy prices continued to hurt consumers. This could bolster the case for the BSP to tighten monetary policy earlier than expected.
Consumer prices rose to a 40-month high of 4.9% annually, from 4% in March and 4.1% in April a year ago, preliminary data from the Philippine Statistics Authority released last week showed.
It was the quickest pace since the 5.2% print in December 2018, and higher than the 4.6% median estimate in a BusinessWorld poll.
The headline figure also breached the central bank’s 2-4% target for the year and was near the upper bound of its 4.2-5% forecast for April.
The last time inflation went above the target was in September 2021 when it rose by 4.2%.
Inflation averaged 3.7% in the four months to April, lower than the 4.1% seen in the same period last year. However, it was still lower than the central bank’s 4.3% forecast for the year.
BSP Governor Benjamin E. Diokno said last month they will consider a rate hike in their June 23 review, more hawkish compared with his earlier statements that the central bank will only start normalizing its pandemic-driven easy policy by the second half of the year. Benchmark rates have been at record lows since 2020.
Meanwhile, the Fed last week raised rates by 50 bps. Atlanta Fed President Raphael Bostic said the US central bank can stick to half-point interest rate hikes for the next two to three meetings and assess the economy and inflation before deciding if further increases are needed, Reuters reported.
The BTr wants to raise P200 billion from the domestic market in May, or P60 billion via T-bills and P140 billion through Treasury bonds.
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