The Bureau of the Treasury only partially awarded the six-month debt paper it auctioned Monday as the market sought higher yields ahead of the US Federal Reserve’s anticipated rate hikes in the coming months.
While the Treasury fully awarded the 91- and 364-day T-bills, it sold only less than half of the offering for the 182-day IOUs.
All P6 billion in three-month treasury bills were awarded at a rate of 2.36 percent, up from 2.252 percent during the previous auction. Tenders for the 91-day debt paper reached P8.57 billion.
Also, P4 billion in one-year T-bills were all sold at 2.763 percent, an annual rate slightly down from 2.766 percent two weeks ago. Bids for the 364-day IOUs hit P9.405 billion, or more than double the offering.
As for the 182-day treasury bills, only P2.43 billion or less than half of the P5-billion offer was awarded, even as tenders amounted P5.13 billion. The Treasury sold the six-month T-bills at an average rate of 2.587 percent, higher than the previous auction’s 2.467 percent.
Had the Treasury fully awarded the 182-day debt paper, the rate would have jumped to 2.83 percent.
“This is a much better turnout compared to the past T-bills auction that we had—you look at the total demand and we have reached about P23 billion. That’s fully subscribed to all tenors offered today so the committee for the 91- and 364-days decided for a full award,” Deputy National Treasurer Erwin D. Sta. Ana told reporters after the auction.
But for the 182-day paper, Sta. Ana noted a “slightly muted response from the dealers,” hence a partial award, “just to be able to manage the curve of the short end.”
“We think that the reason why the 182-day behaved like that is because of the anticipation of the moves from the Fed in the second half of the year, and it is actually starting to show in the numbers, because I think today it reached about 40 percent in terms of the probability of a hike, and toward the second half of the year, we could observe a little bit higher rate in terms of probability of a Fed action,” Sta. Ana explained.
Minutes of the policy-setting Federal Open Market Committee (FOMC) released last week indicated a rate hike “fairly soon.”
Last December, the FOMC unanimously voted to raise the key federal funds rate to a range of 0.5-0.75 percent, only the second time that US interest rates were increased during the last 10 years following a similar move in December 2015.