BTr partially allocates Treasuries supply as rates rise on crunch bets
THE GOVERNMENT has partially allocated the Treasury bonds (T-bills) it offered on Monday as investors wanted higher yields, with the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve expected to raise borrowing costs further this year due to risingflation.
The Bureau of the Treasury (BTr) raised just 14 billion pesos through the treasury bills it auctioned on Monday, even as total tenders reached 29.68 billion pesos, or nearly double the 15 billion pesos offr.
Broken down, BTr raised 5 billion pesos as expected through 91-day Treasury bills, with total bids reaching 12.33 billion pesos. The average tenor rate rose 13.2 basis points (bps) to 1.572% from 1.44% last week.
The government has also made a full price of P5 billion of its offer of 182-day Treasury bills as tenders reached 15.02 billion pesos. The average rate for the six-month term rose 10 basis points to 1.934% from the 1.834% at last week’s auction.
Meanwhile, the Treasury has partially awarded its offer of one-year securities, raising just 3.924 billion pesos on the 5 billion peso program even as the term attracted 6.84 billion pesos in bids. The average one-year Treasury bill rate rose 2.8 basis points to 2.325% from 2.297% seen at the previous auction, when it was fully sold.
In the secondary market ahead of Monday’s auction, 91-day, 182-day and 364-day Treasury bills were quoted at 1.4863%, 1.8785% and 2.1071%, respectively, based on benchmark rates from PHP Bloomberg evaluation published on the Philippine Dealing System website.
National Treasurer Rosalia V. de Leon said in a Viber message to reporters that the government had allocated part of its Treasury bill offer as rates climbed on expectations of further tightening from the BSP and the Fed.
Mrs De Leon said with us inflation being consistently high, this may cause the Fed to Ifagainff a more aggressive rate hike at its June 14-15 meeting.
A trader said in a Viber message that Philippine faster inflation and the Fed’s policy meeting this week have prompted investors to demand higher rates.
The U.S. consumer price index rose 8.6% faster than expected last month, the biggest year-over-year increase since December 1981, according to U.S. Labor Department data released on Friday. , showing inflation has not yet peaked.
This has prompted new bets of aggressive action from the Fed that could dampen the growth prospects of the world’s largest economy.
The US central bank kicked off its tightening cycle with a 25 basis point hike in March, followed by a 50 basis point hike last month as inflation continued to hit multi-year highs.
Meanwhile, at home, Monetary Board member and new BSP chief Felipe M. Medalla said in a Bloomberg interview last week that they were “almost” sure to raise at their meeting on the 23rd. June and that there was also a “90% chance” of another increase. during their subsequent review on August 18.
Mr Medalla said the real question is whether a rise in August would be the last of the year and noted that decisions beyond that would depend on the data.
Increases of 25 basis points at the June and August Monetary Council meetings would take the benchmark rate to 2.75% from 2.25% currently. The BSP began unwinding its pandemic-related ease policy with a 25 basis point hike in its May 19 review.
Headline inflation in May jumped to 5.4% year-on-year, from 4.9% in April and 4.1% a year ago. This is the fastest print since the 6.1% seen in November 2018.
Since the beginning of the year, inflation has averaged 4.1%. This figure is lower than the central bank’s forecast of 4.6%, but higher than its target of 2 to 4% for the year.
BTr wants to raise 250 billion pesos on the domestic market in June, ie 75 billion pesos via treasury bills and 175 billion pesos via treasury bills.
The government is borrowing from local and external sources to help fund a budget deficit capped at 1.65 trillion pesos this year, or 7.7 percent of gross domestic product. — Tobias Jared Tomas