T-bill rates up as US Fed set to greenlight rate hike

Treasury bill yields rose across the board ahead of a likely US Federal Reserve rate hike, which is expected to finally happen next week.

The Bureau of the Treasury on Monday awarded only P10.5 billion out of the P20-billion T-bill offering, even as the auction was oversubscribed with a total of P24.7 billion tendered by investors.

“Amid healthy national government cash position, limited demand and rising rates, the auction committee decided to partially award to provide market guidance and allow a gradual adjustment in light of the possible Fed rate lift-off in December,” the Treasury said in a statement.

The Treasury noted the T-bills’ average rates fell below secondary market rates during Monday’s auction.

For the benchmark 91-day T-bill maturing on Mar. 9 next year, the Treasury accepted only P4.2 billion out of the P8-billion offer. The yield for the three-month IOU, which received a total P10.3 billion in tenders, rose 6.3 basis points to 1.836 percent from 1.773 percent last month.

The 182-day debt paper fetched P8.3 billion in bids, exceeding the P6 billion offered. However, only P4.1 billion in three-month government securities maturing on June 8 next year were awarded, as the yield increased by 3.7 basis points to 1.843 percent from 1.806 percent a month ago.

For the 364-day Treasury bill maturing on Dec. 7 next year, investors tendered P6.1 billion, slightly higher than the P6-billion offering. The Treasury nonetheless accepted only P2.1 billion for the one-year debt paper at a higher rate of 1.952 percent, up 7.4 basis points from the previous auction’s 1.878 percent.

The Treasury also made partial awards of the T-bills auctioned off in October and November mainly on higher bid rates resulting from “uncertainty” in the market pending the US Fed decision.

Expectations that the Fed will lift rates this month “created more aggressiveness on the part of investors to ask for an increase in rates,” National Treasurer Roberto B. Tan said in November.

The Treasury will auction off P25 billion in five-year T-bonds on Dec. 15, the last domestic borrowing for the year.