BTr upsizes T-bill award even as yields mostly rise on tariff woes

THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded on Monday amid strong demand, even as rates mostly rose due to concerns over the economic impact of the Trump administration’s tariffs.

The Bureau of the Treasury (BTr) raised P28 billion from the T-bills it auctioned off on Monday, higher than the initial P22-billion plan, as total bids reached P67.88 billion, more than twice as much as the amount on offer but lower than the P118.944 billion in tenders recorded on March 17.

The oversubscription led the BTr to double the accepted non-competitive bids for the 182- and 364-day papers.

Broken down, the Treasury borrowed P7 billion as planned via the 91-day T-bills as tenders for the tenor reached P18.825 billion. The three-month paper was quoted at an average rate of 5.157%, rising by 3.9 basis points (bps) from the 5.118% seen at the previous auction. Tenders accepted by the BTr carried yields of 5.14% to 5.179%.

Meanwhile, the government made a P9.8-billion award of the 182-day securities, above the P7-billion program, as bids for the paper amounted to P19.925 billion. The average rate of the six-month T-bill was at 5.554%, 5.8 bps higher than the 5.496% fetched last week, with accepted rates ranging from 5.488% to 5.599%.

Lastly, the Treasury raised P11.2 billion via the 364-day debt papers, more than the P8 billion placed on the auction block, as demand for the tenor totaled P29.13 billion. The average rate of the one-year debt inched down by 1.6 bps to 5.681% from 5.697% previously, with bids accepted having yields of 5.673% to 5.697%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.1769%, 5.5258%, and 5.6877%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

The government increased its award of six-month and one-year T-bills as it took advantage of the strong demand seen for both tenors, a trader said in a text message.

“Yields were steady to a bit higher though, but still below projected path of BSP (Bangko Sentral ng Pilipinas) policy rates,” the trader added.

T-bill rates were mostly higher on Monday as they corrected after declining for the past weeks and amid market worries over US President Donald J. Trump’s plan to impose reciprocal tariffs by next month, which could affect both economic growth and inflation in the world’s largest economy and potentially lead to fewer rate cuts by the Federal Reserve, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“However, the 364-day T-bill average auction yield was again slightly lower week on week amid the relatively higher total demand…, as the investors could have again anticipated possible local policy rate cuts for the coming months by locking in yields before they go down further,” Mr. Ricafort added.

BSP Governor Eli M. Remolona, Jr. told Bloomberg News last week that the Monetary Board could resume their easing cycle at their April 10 policy meeting following the surprise pause in the February review, especially if March inflation turns out better than expected.

Mr. Remolona added that the BSP could deliver 50 bps in cuts this year, with 75 bps in reductions likely if economic growth weakens further.

The BSP has brought down its policy rate by a cumulative 75 bps to 5.75% since it began its easing cycle in August last year.

Meanwhile, Mr. Trump has vowed to impose a complicated barrage of tariffs next week, the details of which are not clear save that they are to be calculated to reflect the impact of foreign tariffs as well as foreign value-added taxes on imports, Reuters reported.

The International Monetary Fund, which meets next month in Washington for the first time since Mr. Trump’s inauguration, had previously warned of the blow a trade war could deal across the global economy. Economists see a likely recession in Canada and Mexico, which depend mightily on exports to the US and have been particularly targeted by Trump, while shifts in global currency and capital flows and US foreign spending are already creating sets of winners and losers. 

In new projections last week, Fed officials said they expect slower growth and higher inflation in the year ahead, with risks tilted to the upside, but perhaps more significantly feel the economic horizon is so obscured that the outlook for monetary policy has become a shrug of the shoulders.

“What would you write down?” when making projections in this environment, Fed Chair Jerome H. Powell said after the Fed held interest rates steady on Wednesday but still projected two quarter-percentage-point cuts by yearend.

That was the same view as in December despite policy makers’ outlook for rising inflation, but Mr. Powell said this round of rate projections involved “frankly, a little bit of inertia” against making any change given “unusually elevated” uncertainty.

“I mean it’s just… really hard to know how this is going to work out,” he said.

That same sort of default setting may have appeared in the Fed’s growth projections, which showed growth slowing roughly to the Fed’s estimated long-run trend of 1.8% and staying there through 2027 — an outcome counter to Mr. Trump’s promise of a “golden age” to make up for the immediate disruption his policies are beginning to cause.

Growth has been steadily above estimates of potential, boosted by a jump in productivity that Fed officials and analysts have cheered even as they caution there’s no guarantee it will continue.

The Fed’s new projections show all that coming back down to earth, with new risks to what had seemed a path for the central bank to return inflation to 2% without paying much of a price in terms of lost growth or jobs.

Monday’s T-bill auction was the last for the month. The BTr raised P111.6 billion from short-term papers in March, higher than the P88-billion plan as it hiked its awards at three auctions.

On Tuesday, the government will offer P35 billion in Treasury bonds, or P10 billion in reissued seven-year debt with a remaining life of three years and 27 days and P25 billion in reissued 25-year bonds with a remaining life of 24 years and 10 months.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy with Reuters