Treasury bill rates rise

Ahead of a looming rate hike by the US Federal Reserve, rates rose across-the-board during the undersubscribed T-bills auction Monday, such that the Bureau of the Treasury sold only over half of the P20-billion total offering.

The Treasury fully awarded the P8 billion in benchmark 91-day IOUs at an average rate of 1.555 percent, up 7.1 basis points from 1.484 percent last month. Investors tendered P11.21 billion for the three-month T-bills.

For the 182-day debt paper, the Treasury awarded P3.058 billion at 1.876 percent, up 6.7 basis points from 1.809 percent a month ago. The six-month T-bills were undersubscribed, as the P5.218-billion bids were below the P6-billion offering.

As for the 364-day government securities, the Treasury rejected all bids for the P6-billion offering, as the rate could have jumped 65.2 basis points to 2.532 percent from 1.88 percent previously. The one-year treasury bills were also undersubscribed, attracting only P3.55 billion in tenders.

In all, the Treasury awarded a total of P11.058 billion in T-bills, while bids amounted P19.978 billion.

National Treasurer Roberto B. Tan said the auction results were a result of investors anticipating the Fed rate increase expected at its upcoming meeting this month.

“A lot of players are now standing on the sidelines and probably waiting for the Fed decision and the reaction of the Bangko Sentral ng Pilipinas,” Tan said.

He cited that the BSP’s term deposit facility auction last week was also undersubscribed, the first time since launched in June.

The Treasury will auction P25 billion in reissued five-year T-bonds today, a week earlier than the original schedule as well as ahead of the US Fed meeting on Dec. 13 to 14.

Also, Tan said the planned global bond sale for next year was already acted upon by the BSP’s Monetary Board. The Treasury’s request was for a total of $2-billion issuance, with $500 million for new money, he said.
Last week, an official privy to the matter said the Monetary Board, the BSP’s highest policymaking body, “approved in principle” the plan to sell bonds offshore next year even as the Treasury still has to decide on the right timing to execute the transaction given heightened uncertainty in global markets.

“It’s been approved in principle because details will not be coming until they [the Treasury] start talking to the markets,” the official said, citing for instance that “we’ll never know what the rates will be next year.”

According to the official, the Treasury “might decide to borrow less or borrow more depending on what they will find out later on.”

“These are highly uncertain times, especially after the election of [incoming US President Donald] Trump,” the official said.

A foray into the global bond market entails approval of the Monetary Board as well as the President.