Gov’t makes partial award of T-bill offer


THE GOVERNMENT partially awarded the Treasury bills (T-bills) it offered on Monday as investors asked for higher returns in anticipation of further tightening by the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) this year.

The Bureau of the Treasury (BTr) raised just P6.654 billion via the T-bills it auctioned off on Monday even as total tenders reached P20.86 billion, higher than the P15-billion offer.

Broken down, the BTr borrowed just P2.505 billion through the 91-day T-bills, even with total bids reaching P8.3 billion, above the P5-billion program. The average rate of the tenor rose by 190.2 basis points (bps) to 4.22% from the 2.318% seen on Sept. 5, the last successful award. Accepted rates ranged from 4.15% to 4.25%.

The Treasury also raised only P2.1 billion via the 182-day securities despite tenders reaching P7.466 billion versus the P5-billion plan. The average rate of the six-month T-bill went up by 69.2 bps to 4.65% from the 3.958% quoted for the last successful award on Sept. 26. Accepted rates were all at 4.65%.   

Meanwhile, the BTr awarded just P2.049 billion through the 364-day debt papers, even with demand for the tenor reaching P5.094 billion, slightly higher than the P5 billion on the auction block. The average rate of the tenor increased by 109.3 bps to 4.875% from 3.782% fetched for the last successful award on Aug. 22. Accepted rates were at 4.875%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 3.5554%, 4.3793%, and 3.9236%, respectively, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates data provided by the Treasury.

“The Auction Committee partially awarded bids for Treasury bills at today’s auction. Rates for the 91-, 182 -, and 364-day T-bills were capped at 4.220%, 4.650% and 4.875%, respectively,” the BTr said in a statement on Monday.

“The auction was more than 1.4 times oversubscribed, attracting P20.9 billion in total tenders. With its decision, the Committee raised a total of P6.7 billion of the P15-billion programmed offering,” it said.

National Treasurer Rosalia V. de Leon said in a Viber message that the government made a partial award amid a pickup in demand for the T-bills, which she noted was due to banks needing to place their funds in debt instruments.

Analysts said T-bill yields climbed on Monday amid rate hike expectations.

“The results were roughly in line with expectations given the bearish sentiment towards interest rates. Market participants continued to submit higher yields in line with the expected interest rate increases by both the US and the BSP,” a trader said in a text message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message that T-bill rates went above 4% and comparable BVAL yields after the BSP and Finance chiefs hinted at more big hikes from the central bank in their last two meetings for the year.

“Partial awards were only made due to the higher bid yields. Market expectations and Fed signals of another jumbo rate hike of +0.75 on Nov. 2, 2022 also led to higher T-bill auction yields,” Mr. Ricafort said.

BSP Governor Felipe M. Medalla on Monday said the central bank may need to raise rates by more than 100 bps in its last two meetings this year, depending on the Fed’s aggressiveness, Reuters reported.

Finance Secretary Benjamin E. Diokno, a member of the BSP’s policy-setting Monetary Board, also said on Monday that benchmark rates should be raised by 100 bps before the year ends to help support the peso, noting this could be done via two 50-bp hikes or a 75-bp increase at the Nov. 17 meeting and a 25-bp hike at the Dec. 15 review.

If realized, this would bring the BSP’s policy rate to 5.25% — the highest since the central bank adopted the interest rate corridor framework in 2016.

The BSP has raised key rates by 225 bps so far this year as it seeks to rein in inflation, which in the first nine months averaged 5.1%, above the central bank’s 2-4% target but below its 5.6% forecast for the year.

Meanwhile, the Fed is expected to deliver another large rate hike at its Nov. 1-2 meeting as inflation remains high, with more increases also expected to be on the table until next year. The US central bank has raised rates by 300 bps since March, with the latest move being a third straight 75-bp increase last month.

On Tuesday, the BTr will auction off P35 billion in reissued 25-year Treasury bonds (T-bonds) with a remaining life of 12 years and 11 months.

The Treasury wants to raise P200 billion from the domestic market this month, 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. — Luisa Maria Jacinta C. Jocson with Reuters

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