Gov’t fully awards T-bills at higher rates on inflation fears

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday even as average rates went up week on week amid renewed inflation concerns after the United States and Israel launched attacks on Iran.

The Bureau of the Treasury (BTr) raised P27 billion as planned via the T-bills it auctioned off as the offering was almost thrice oversubscribed, with total tenders reaching P76.546 billion. However, this was below the P96.82 billion in bids recorded last week.

The Auction Committee made a full award of its offer as all tenors fetched average yields that were below the prevailing secondary market levels, the Treasury said in a statement.

Broken down, the government awarded P9 billion as planned in 91-day T-bills as demand for the tenor reached P27.666 billion. The three-month paper fetched an average rate of 4.311%, up by 7.1 basis points (bps) from 4.24% last week. Bids accepted had yields ranging from 4.26% to 4.445%.

The Treasury also borrowed the programmed P9 billion via the 182-day debt as tenders hit P30.5 billion. The average rate of the six-month T-bill was at 4.417%, rising by 6 bps from 4.357% previously. Tenders awarded carried rates from 4.389% to 4.45%.

Lastly, the BTr sold the targeted P9 billion from the 364-day securities as bids totaled P18.38 billion. The one-year paper’s average yield was at 4.564%, climbing by 6.3 bps from 4.501% last week. Accepted bids had rates from 4.5% to 4.6%.

At the secondary market before Monday’s auction, the 91-, 182-, and 364-day T-bills were quoted at 4.4312%, 4.5242%, and 4.6208%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

T-bill yields rose after declining for seven straight weeks before the release of February inflation data, with players expecting a higher headline figure from the January print, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“T-bill average auction yields also corrected slightly higher after the recent geopolitical risks related to Iran that led to higher global crude oil prices… that could lead to higher local fuel pump prices and could lead to some pick up in overall inflation,” he added.

“Demand was weak given recent developments, which may push inflation expectations in the near term that may delay rate cuts globally,” a trader likewise said in a text message. “This will warrant less rate cuts or even possible hikes if prolonged as the supply chain is affected again.”

A BusinessWorld poll of 17 analysts yielded a median forecast of 2.4% for February inflation, which would be the fastest clip in 13 months or since the 2.9% in January 2025.

This would be faster than the 2% recorded in January and the 2.1% in February 2025 and would mark the straight month that inflation settled within the Bangko Sentral ng Pilipinas’ (BSP) 2%-4% annual target.

Still, this is close to the low end of the central bank’s 2.3%-3.1% forecast for the month.

Oil prices surged by as much as 13% on Monday after shipping in the crucial Strait of Hormuz was disrupted by retaliatory Iranian attacks following initial bombing by Israel and the United States that killed Iranian Supreme Leader Ali Khamenei, Reuters reported.

Brent crude futures rose to as much as $82.37 a barrel, the highest since January 2025, before retreating to be up $5.41, or 7.4%, to $78.28 by 0605 GMT.

US West Texas Intermediate crude climbed to an intraday high of $75.33, up over 12% and the highest since June, though it later pared gains and was up $4.74, or 7.1%, at $71.76.

Both benchmarks jumped as a sustained exchange of counterattacks damaged tankers and sharply disrupted shipments in the Strait of Hormuz, a waterway between Iran and Oman that connects the Gulf to the Arabian Sea.

On a typical day, ships carrying oil equal to about one-fifth of global demand from Saudi Arabia, the UAE, Iraq, Iran, and Kuwait sail through the Strait along with tankers hauling diesel and jet fuel and gasoline and other products from their refineries to major Asian markets including China and India.

On Tuesday, the government will offer P30 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of four years and 10 months.

The Treasury wants to raise P248 billion from the domestic market this month, or P108 billion in T-bills and P140 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy with Reuters