Treasury caps short-term borrowings below 3 percent yield

Rosalia de Leon

MANILA, Philippines—The Bureau of the Treasury (BTr) on Monday (July 12) capped the yields on short-dated T-bills below 3 percent, such that it raised P13.16 billion or less than the intended borrowings.

The benchmark 91-day treasury bill was awarded at an average of 1.876 percent, down from 1.908 percent last week.

As such, the BTr borrowed P5 billion in three-month debt paper, as programmed, from government securities eligible dealers (GSEDs).

However, the two longer T-bill tenors fetched higher bid rates: the 182-day debt paper’s 2.907 percent climbed from last week’s 2.608 percent, while the 364-day securities’ annual rate rose to 2.981 percent from 2.811 percent previously.

With capped rates, the BTr raised P4.1 billion from the six-month, and P4.06 billion from one-year treasury bills, instead of also P5-billion each.

National Treasurer Rosalia de Leon said the yield cap at Monday’s auction was “based on the BTr’s reasonableness test, including guidance from the Bangko Sentral ng Pilipinas (BSP) on the path of its rate hike.” De Leon declined to elaborate on this “resistance level” for treasury bill rates.

Last week, BSP Governor Felipe Medalla did not discount an upsized 50-basis point (bp) interest rate hike during the Monetary Board’s next policy stance meeting in August, to rein in above target first half inflation averaging 4.4 percent, due to expensive food and oil. Following two-straight 25-bp hikes, the policy rate now stood at 2.5 percent.

The BSP will also more aggressively tighten alongside central banks worldwide to temper elevated global inflation amid supply shocks wrought by Russia’s invasion of Ukraine, coupled with the prolonged COVID-19 pandemic.

GSEDs were willing to lend the BTr a total of P36.7 billion, or 2.4 times more than the P15-billion offering.

The government will borrow a total of P2.2 trillion this year, of which three-fourths or P1.65 trillion shall be sourced locally through the issuance of treasury bills and bonds.

For the period 2023 to 2028, the Marcos administration plans to raise 80 percent of its borrowing requirements from the domestic debt market, Finance Secretary Benjamin Diokno said last Friday (July 8).

Diokno said the continued reliance on local financing would reduce foreign exchange risks.

TSB