Treasury bills, bonds fetch higher rates

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday but partially awarded the Treasury bonds (T-bonds) it auctioned off as rates rose across all tenors amid hawkish bets on the Bangko Sentral ng Pilipinas’ (BSP) policy statement later in the day.

The Bureau of the Treasury (BTr) raised P15 billion as planned from the T-bills it offered on Monday as total bids reached P39.939 billion, or more than twice the amount on the auction block.

Broken down, the BTr borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P10.333 billion. The three-month paper was quoted at an average rate of 5.772%, 6.8 basis points (bps) higher than the 5.704% seen last week. Accepted rates ranged from 5.698% to 5.8%.

The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P15.036 billion. The average rate for the six-month T-bill stood at 5.885%, up by 2 bps from the 5.865% fetched last week, with accepted rates at 5.823 to 5.919%.

Lastly, the Treasury also raised P5 billion as planned via the 364-day debt papers as demand for the tenor totaled P14.57 billion. The average rate of the one-year T-bill went up by 1.8 bps to 5.983% from the 5.965% quoted for a P7-billion award last week. Accepted yields were from 5.95% to 6.025%.

The Treasury on Monday allowed tax-exempt government-owned and -controlled corporations to purchase one-year T-bills over the counter at government financial institutions at the same average rate.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7527%, 5.8942%, and 6.0057%, respectively, based on PHP Bloomberg Valuation (BVAL) Service Reference Rates data provided by the BTr.

Meanwhile, the BTr raised just P20.625 billion for the reissued 10-year bonds it offered on Monday, below the P30-billion program, despite total bids reaching P37.36 billion or more than the auction volume.

This brought the total outstanding volume for the series to P85.6 billion, the BTr said in a statement after the auction.

The bonds, which have a remaining life of nine years and nine months, were awarded at an average rate of 6.439%, with accepted yields ranging from 6.365% to 6.48%.

The average rate of the reissued bonds was 21.2 bps higher than the 6.227% quoted for the papers when they were last offered on March 12 and 18.9 bps above the 6.25% coupon for the issue.

This was also 6.5 bps higher than the 6.374% seen for the same bond series and 10.8 bps above the 6.331% quoted for the 10-year tenor at the secondary market on Monday before the auction, based on PHP BVAL Service Reference Rates data provided by the Treasury.

“The awarded rates at today’s auction reflected hawkish expectations ahead of the BSP meeting today,” a trader said in an e-mail on Monday.

The BSP on Monday kept its policy rate unchanged at a near 17-year high of 6.5% for a fourth straight meeting, as expected by 16 analysts in a BusinessWorld poll last week.

Rates on the central bank’s overnight deposit and lending facilities were likewise kept at 6% and 7%, respectively.

BSP Governor Eli M. Remolona, Jr. said at a briefing after the meeting that the Monetary Board deemed it necessary to maintain its tight policy settings amid persistent upside risks to inflation stemming from higher food and transport costs, adding they stand ready to adjust rates as needed to ensure price stability.

The BSP hiked borrowing costs by 450 bps from May 2022 to October 2023 to tame inflation.

Headline inflation quickened for a second straight month in March as prices of rice continued to surge, the Philippine Statistics Authority (PSA) reported last week.

The consumer price index (CPI) accelerated to 3.7% year on year in March from 3.4% in February, preliminary data from the PSA showed. This was slower than the 7.6% clip in the same month last year.

The March CPI was within the BSP’s 3.4-4.2% forecast for the month and was slightly below the 3.8% median estimate in a BusinessWorld poll of 17 analysts. March also marked the fourth straight month that inflation was within the central bank’s 2-4% target range.

Rice inflation climbed to 24.4% in March from 23.7% in February. This was also its fastest print since the 24.6% in February 2009.

It contributed 1.8 ppt to headline inflation or around 48% of the total.

For the first quarter, headline inflation averaged 3.3%.

Cautious signals from US Federal Reserve officials last week also pushed up T-bill and T-bond yields on Monday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Federal Reserve officials including US central bank chief Jerome H. Powell on Wednesday continued focusing on the need for more debate and data before interest rates are cut, a move financial markets expect to occur in June, Reuters reported.

“Recent readings on both job gains and inflation have come in higher than expected,” Mr. Powell said in a speech to the Stanford Graduate School of Business. While policy makers generally agree that rates can fall later this year, he said this will happen only when they “have greater confidence that inflation is moving sustainably down” to the Fed’s 2% target.

His remarks repeated language the Fed has adopted as it tries to balance the risks of cutting interest rates before inflation is truly controlled with the risks of suppressing economic activity more than is needed.

The Fed last month held its benchmark overnight interest rate steady in the 5.25%-5.5% range, where it has been since July.

The BTr is looking to raise P195 billion from the domestic market this month or P75 billion from T-bills and P120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.6% of gross domestic product this year. — A.M.C. Sywith Reuters