Treasury-bill rates rise on partial award

MANILA, Philippines — The Bureau of the Treasury (BTr) yesterday partially awarded 91-day Treasury-bills, but rejected bids for 182- and 364-day securities as the market asked for higher rates amid expectations of a higher inflation footprint last March.

During yesterday’s auction, the Treasury awarded only P3.265 billion in tenders for the three-month T-bills after cutting off the accepted rates at 3.25 percent.

Despite this, average rates for the debt papers still rose 19.6 basis points to 3.191 percent from the 2.995 percent recorded in the previous auction last March 26.

The 91-day T-bills were oversubscribed, with total tenders amounting to P8.725 billion, above the P5 billion offering.

On the other hand, the BTr rejected all bids for 182-day T-bills as the rates asked by traders averaged 3.515 percent, 30.9 basis points higher than the 3.206 percent fetched during the previous auction.

The securities received underwhelming demand with total bid reaching P2.663 billion, below the P4 billion original volume.

All bids for one-year T-bills were likewise rejected after the market asked for rates averaging 3.803 percent for the securities. This would be 36.9 basis points up from the 3.434 percent recorded during the previous auction.

Total tenders amounted to P2.243 billion, below the P6 billion offering.

In an interview, National Treasurer Rosalia De Leon said the high rates sought by traders could be attributed to the higher inflation forecast of the Bangko Sentral ng Pilipinas (BSP) for March, which ranged from 3.8 percent to 4.6 percent.

“Because the inflation (forecast) median of 4.2 percent came out today. Inflation outturn, I think is also priced in by the market in today’s auction,” De Leon said.

She said the market also has expectations of a possible rate hike in the next policy meeting of the BSP’s Monetary Board.

These considerations, she said, were also reflected in the volume of demand as seen during the auction.

She said demand went to the 91-day T-bills as “they (traders) don’t want to be locked in at a lower rate.”

De Leon, however, expressed confidence market conditions would improve once upward pressures on rates subside, coupled with the BSP’s policy to cut reserve requirements, which she said would fuel more liquidity in the financial system.

At the moment, De Leon said the government remains with a sound cash position given the increase in tax collections of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).

She said any other fund raising activities or debt swap, if possible, would depend on market conditions once these pressures and uncertainties have subsided.

From January to February 2018, the BIR generated P280.6 billion in revenues, 10.8 percent up from the P253.3 billion recorded the same period last year.

BIR data also showed this was 17.55 percent higher than the bureau’s collection target for the two-month period, which was set at P238.71 billion.

Tax collections of the BOC also grew 26.5 percent to P85.63 billion from P66.8 billion in the same period in 2017. This is, however, 2.81 percent lower than the BOC’s P88.10 billion target for the period.