BTr awards only ₧9.3B of ₧35B in treasuries

THE Bureau of Treasury only awarded P9.3 billion out of its P35 billion offering of reissued 3-year Treasury bonds (T-bonds) on Tuesday as investors submitted higher rates on the back of expectations of quicker inflation.

With a remaining life of 2 years and 10 months, the security capped at an average rate of 4.994 percent, higher than the comparable secondary market benchmark rates.

National Treasurer Rosalia V. De Leon told reporters that investors factored in rate-hike signals from both the US Federal Reserve and the Bangko Sentral ng Pilipinas to address inflation.

According to De Leon, the Treasury “saw good bid to cover but market remained defensive with inflation expected to breach beyond 5 percent per Bloomberg estimate.”

“Bids also took cue that Fed will [cue] another 50bps [basis points] hike and guidance from [BSP] Gov [Benjamin] Diokno for another 25bps rate lift this June.”

Had the Treasury fully awarded the debt papers, the average rate would have reached 5.113 percent. This would have been higher by 15.9 basis points than the Bloomberg Valuation Service (BVAL) Reference rate for the tenor at 4.835 percent. Likewise, it would have been up by 4.8 basis points than the BVAL rate for the security of 4.946 percent.

Nonetheless, the auction attracted total bids of P56.9 billion, making it oversubscribed.

Market expectations on the pace of the rise in prices were bolstered after the Cabinet-level Development Budget Coordination Committee (DBCC) hiked last week assumptions for the country’s inflation rate this year to 3.7 percent to 4.7 percent; way above the original target band of 2 to 4 percent.

The DBCC said that prices of food and fuel increased as the ongoing geopolitical tensions from Russia-Ukraine conflict showed no let up and disrupted supply chains.

For this month, the Treasury is set to borrow P250 billion from the domestic debt market, of which P175 billion is expected to come from auctioning off Treasury Bonds and another P75 billion through it sale of T-bills.

Since Monday, the Treasury has raised P19.3 billion of its P50 billion offering so far.

As of end-March, the national government’s outstanding debt has hit a new record-high of P12.68 trillion as it resorted to more borrowings after revenue collections remained weak while government spending grew.

The national government’s debt-to-GDP ratio has also risen to a 17-year-high at 63.5 percent, above the internationally recommended 60-percent threshold by multilateral lenders for emerging markets like the Philippines. It is also the highest since the country’s debt-to-GDP ratio hit 65.7 percent in 2005 under the Arroyo administration.