Yields on T-bills, bonds go up

THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it auctioned off on Tuesday but rejected all bids for the reissued 10-year Treasury bonds (T-bonds), with yields climbing across the board due to hawkish policy bets.

The Bureau of the Treasury (BTr) raised P12.75 billion via the T-bills it auctioned off on Tuesday, short of the P15-billion program, even as total bids reached P21.941 billion.

Broken down, the Treasury made a full P5-billion award of the 89-day T-bills, with tenders for the tenor reaching P7.836 billion. The three-month paper was quoted at an average rate of 6.343%, 19.4 basis points (bps) above the 6.149% seen for a partial award last week. Accepted rates ranged from 6.185% to 6.42%.

Meanwhile, the government borrowed only P3.96 billion through the 179-day securities, short of the P5-billion program, despite bids for the paper reaching P6.41 billion. The average rate for the six-month T-bill stood at 6.462%, up by 13.2 bps from the 6.33% seen last week, with accepted yields ranging from 6.399% to 6.5%.

The government raised just P3.8 billion via the 362-day debt papers, short of the P5-billion plan, despite bids reaching P7.695 billion. The average rate of the one-year T-bill rose by 11.3 bps to 6.592% from the 6.479% quoted for last week’s full award. Accepted yields were from 6.55% to 6.6%.

The T-bill tenors were adjusted from the usual 91-, 182- and 364-day maturities due to this week’s holidays.

At the secondary market on Tuesday, the 91-, 182-, and 364-day T-bills were quoted at 6.107%, 6.251%, and 6.506%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

Meanwhile, the BTr did not accept any tenders for its offer of reissued 10-year T-bonds that have a remaining life of five years and two months as total bids stood at P26.899 billion, below the P30 billion auctioned off by the government.

Had the Treasury accepted all tenders, the issue’s average rate would have climbed by 68.4 bps to 7.196% from the 6.512% average rate quoted for the papers when they last offered on Oct. 10.

This would also be 32.1 bps above the issue’s 6.875% coupon and 48.2 bps higher than the 6.714% quoted for the five-year bond at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The Auction Committee decided to fully reject bids for the reissued Treasury Bonds (FXTN 10-64) in today’s auction. With a remaining term of 5 years and 2 months, the average rate for the reissued T-bonds reached 7.196% had it been awarded, with P26.9 billion in total tenders. The total outstanding volume for the series currently stands at P355 billion,” the BTr said in a statement on Tuesday.

The government made a partial award of its T-bill offer as rates rose for the sixth straight week due to hawkish signals from the Bangko Sentral ng Pilipinas (BSP), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. last week said a hike could still be on the table during the Monetary Board’s Nov. 16 meeting, even after the central bank delivered an off-cycle 25-bp increase on Thursday.

Last week’s move was the BSP’s first policy adjustment in seven months and brought the key rate to a 16-year high of 6.5%. Rates on the overnight deposit and lending facilities were likewise raised by 25 bps to 6% and 7%, respectively.

Meanwhile, the BTr did not accept any bids for the reissued 10-year T-bonds as the offer was undersubscribed and rates were higher following the increase in US Treasury yields, Mr. Ricafort added.

T-bond rates were higher “amid expectations of likely hawkish remarks from the Federal Reserve policy meeting this week,” a trader added in an e-mail.

The Fed began a two-day review on Tuesday, where it is expected to keep its target rate unchanged at 5.25-5.5% but reiterate its “higher for longer” policy stance.

The BTr plans to borrow P225 billion from the domestic market this month, or P75 billion via T-bills and P150 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy