Oil price hike fears push T-bill rates up

Except for the benchmark 91-day debt paper, treasury bill rates rose on Monday amid expectations of higher inflation last December and as intensifying tensions between the US and Iran are seen putting upward pressure on global oil prices.

During its first auction for 2020, the Bureau of the Treasury sold a total of P19.1 billion worth of bills out of the P20-billion offering as the rate for the 364-day securities was capped and partially awarded.

The Treasury sold P6 billion in three-month IOUs at an average rate of 3.179 percent, down from 3.192 percent previously.

But for the 182-day treasury bills, the rate rose to 3.435 percent from 3.348 percent previously. The Treasury nonetheless sold all P6 billion in six-month securities it offered.

The one-year bills were awarded at 3.624 percent, up from 3.475 percent previously. Since the rate was capped at 3.75 percent, P7.1 billion in bids were accepted out of the P8-billion offering.

Across the three tenors, tenders totaled P26.8 billion, making the auction oversubscribed.

National Treasurer Rosalia V. de Leon told reporters after the auction that the rates of the 182- and 364-day treasury bills rose because of the brewing tensions between the US and Iran after last week’s airstrike in Iraq that killed a top Iranian military commander. Iranian officials have vowed to retaliate, causing many analysts to warn of heightened risks to global oil supply, of which a big portion comes from the Middle East.

While global oil prices may go up, De Leon said the third tranche of excise tax increases under the Tax Reform for Acceleration and Inclusion Act at the start of the year also worried some investors, resulting in higher bid rates alongside expectations that inflation in December likely exceeded 2 percent.

“Altogether, the rates submitted by bidders during the auction were expected,” De Leon said.

She said that yields, while higher, remained “aligned to market rates and performance” even as the Treasury will still “practice some restraint on higher yields (it will) accept.”

As for the yearly global bond issuance that the Philippines usually embarks on at the start of each year, De Leon said that the Treasury was still securing some government approvals.

Following the US-Iran tensions, the Philippines will have to assess investor appetite and determine if they were on risk-off mode, hence will closely monitor the market first before selling dollar-denominated bonds offshore. INQ