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DESPITE the spike in rates across all tenors due to higher inflation expectations in February, the Bureau of the Treasury (BTr) on Monday fully awarded P20 billion in Treasury Bills (T-bills).
While the auction was still oversubscribed as total tenders reached P41 billion, which was more than twice the offer, this was still lower than the total bids in previous auctions.
The 91-day T-bills average rate jumped to 1.04 percent, up by 16.5 basis points from 0.875 percent in the previous auction last week. Total bids reached P7.595 billion, higher than the P5-billion offer.
Meanwhile, the 182-day T-bills average rate climbed by 15.9 basis points to 1.226 percent from only 1.067 percent previously. Bids for the security amounted to P8.462 billion, exceeding the P5-billion offer.
For the 364-day T-bills, the average rate surged to 1.68 percent, a 15.3 basis-point increase from last week’s 1.527 percent. Total tenders for the tenor hit P24.995 billion, twice the P10-billion offer.
National Treasurer Rosalia V. De Leon refused to comment on what pushed the rates up. De Leon told reporters the BTr did not open the tap facility auction for any of the tenors.
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort told the BusinessMirror that markets are pricing in “relatively higher inflation” due to damage caused by Typhoon Auring (Dujuan), higher global crude oil prices at new 13.5 month highs, major global commodity prices at 8-year highs, as well as the “weakest” peso-US dollar exchange rate in about four months.
Last Friday, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said he expects inflation to have hit 4.7 percent in February. The expectation is at the higher end of the 4.2-percent actual inflation print in January and above the BSP’s 2-percent to 4-percent target range for the year. It will also be the fastest inflation rate for the country since December 2018 when inflation hit 5.1 percent.
The Philippine Statistics Authority is set to release the country’s official February inflation data on Friday, March 5.
Apart from higher inflation expectations, Ricafort also pointed out that the rise in T-bill yields came amid the ongoing 3-year Retail Treasury Bond offering, scheduled up to March 4, 2021 “that could siphon off some of the excess liquidity from the financial system.”
De Leon said last week that T-bill yields went up as it tracked the movement of US government securities with the market anticipating the passage of a $1.9-trillion stimulus package.
For this month, the BTr programmed to borrow a total of P160 billion from the local debt market.
Finance officials expect national government debt this year to reach 57 percent of gross domestic product (GDP) as the country aims to borrow a total of P3.03 trillion, roughly the same amount it borrowed last year.
The Duterte administration has since ramped up borrowings to finance the expected higher budget deficit as it grapples with the economic recession.
The government posted last year a record-high outstanding debt of P9.795 trillion and a 14-year-high debt-to-GDP ratio of P54.5 percent. This came a year after the country recorded an outstanding debt level of P7.73 trillion as it snatched a historic low debt-to-GDP ratio of 39.6 percent.
The national government’s full-year budget deficit in 2020 also soared to a new record-high at P1.37 trillion, marking the first time since 1986 that it breached a trillion-peso mark.
The Treasury said the wider fiscal gap in 2020 resulted from ramped-up state spending despite reduced tax revenue collections.
As a percentage of GDP, the Duterte administration’s full-year 2020 budget deficit also reached an unprecedented 7.63 percent, even eclipsing the 5.02 percent recorded in 2002.
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