Bids for T-bills rejected as MB seen to tweak policy

THE Bureau of the Treasury fully rejected bids for its P15billion offering of Treasury bills (T-bills) as investors demanded higher rates ahead of the possible rate hike decision from the Bangko Sentral ng Pilipinas (BSP) this week.

If the Treasury decided to fully award bids, the average rates across all tenors would have shot past the comparable secondary market benchmark rates as several analysts are expecting that the Monetary Board (MB) will finally raise the key policy rate in its meeting this Thursday given the stronger first-quarter economic growth at 8.3 percent.

“Full rejection for all tenors,” National Treasurer Rosalia V. De Leon informed reporters. De Leon further said the “market remains defensive and [is] bracing for [a] possible rate hike by the MB with stronger than expected first-quarter GDP [gross domestic product] growth.”

BSP Governor Benjamin E. Diokno said last month monetary authorities may discuss a rate hike in their June meeting on the steady inflation spikes. Diokno also said early May that inflation is expected to remain elevated in the coming months due to the continued volatility in global oil and non-oil prices and the commodities market, ref lecting the largely continued impact of Russia’s invasion of Ukraine and constricted supply chain.

Inflation in April hit 4.9 percent, the highest since the 5.2 percent recorded in December 2018.

The BSP has kept the key interest rate at a record-low of 2 percent since November 2020 to keep the cost of borrowing manageable, especially for businesses adversely affected by intermittent lockdown measures.

Had the Treasury fully awarded the 91-day T-bills, the security would have fetched an average rate of 1.759 percent, higher by 38.5 basis points than the Bloomberg Valuation Service (BVAL) reference rate of 1.374 percent. The 182-day T-bills would have capped at an average rate of 2.215 percent, surging by 53.8 basis points compared with the BVAL rate of 1.677 percent. The 364-day Tbills’ average rate would have reached 2.828 percent, exceeding the comparable BVAL rate of 1.962 percent by 86.6 basis points.

Nonetheless, the auction was oversubscribed as total bids amounted to P23.53 billion.

For this month, the Treasury is targeting to raise P200 billion from the domestic debt market.

Since the start of this month, the Treasury has so far sold P77.7 billion in government securities.

As of end-march, the national government’s outstanding debt has hit a new record-high of P12.68 trillion as borrowings continued to pile up amid the Covid-19 pandemic.

The national government’s debtto-gdp ratio has also risen to a 17-year-high at 63.5 percent, above the internationally-recommended 60-percent threshold by multilateral lenders for emerging markets like the Philippines. This is also the highest since the debt-to-gdp ratio hit 65.7 percent in 2005 under the Arroyo administration.