By Karl Angelo N. Vidal, Reporter
THE GOVERNMENT opted for a partial award of the Treasury bills (T-bills) on offer yesterday as yields on the longer tenors rose, with the market pricing in their expectations on inflation and of another rate hike from the central bank.
The Bureau of the Treasury borrowed only P11.9 billion during its T-bills auction on Monday, falling short of the P15 billion it intended to borrow.
Total tenders reached P26.5 billion during the auction yesterday, climbing from the P20.3 billion tallied during the previous offer and almost two times the total offer volume.
Broken down, the government awarded P4 billion as planned in the 91-day tenor, with total bids amounting to P14.438 billion. The strong demand caused the average rate to slide by eight basis points to 3.404% from last week’s 3.484%.
Meanwhile, the Treasury made a partial award of the 182-day papers, raising just P3.04 billion out of the P5-billion offering. Total tenders amounted to P5.27 billion, while the average yield fetched under the tenor rose 6.4 basis points to 3.937% from the 3.873% tallied during the previous auction.
The government likewise borrowed just P4.029 billion worth of 364-day debt papers out of its P6-billion program as the average rate picked up to 4.566%, climbing 13.7 basis points from the 4.429% logged a week ago. Total tenders reached P6.804 billion.
At the secondary market prior to the auction, three-month and six-month papers were quoted at 3.7714% and 4.0179%, while one-year T-bills fetched a 4.6317% yield.
At the close of the trading session, the rate of the 91-day T-bill was unchanged, while the 182-day and 364-day papers rallied to fetch lower yields of 3.765% and 4.4146%, respectively.
National Treasurer Rosalia V. de Leon said the Treasury saw appetite from market players despite the higher bids for the six-month and one-year T-bills.
“The auction relatively is still oversubscribed… There is still appetite and we see liquidity in the domestic market,” Ms. De Leon told reporters on Monday.
She added that rates of the longer tenors picked up during the auction as banks and other financial institutions priced in their inflation expectations and the possibility of another policy rate hike from the Bangko Sentral ng Pilipinas (BSP).
“Except for the 91-day, both the 182- and 364-day [papers] moved up and that’s because of the median inflation forecast of 4.7%, and also they are expecting the BSP to hike again because of the depreciating peso.”
A BusinessWorld poll among 12 economists yielded a median inflation forecast of 4.7% for the month of June. If realized, the inflation print will accelerate from May’s 4.6% figure to a fresh five-year high.
This consensus also falls in the middle of the 4.3-5.1% inflation estimate given by the BSP on Friday.
Analysts said inflation likely picked up from the previous month due to higher food and oil prices, although this was offset by easing electricity rates.
Meanwhile, the peso dipped to a fresh twelve-year low on Thursday, closing the session at P53.515 against the greenback, due to renewed trade war concerns between the United States and its main trade partners.
“[Market players] are putting cushion in terms of the yields for this two tenors,” Ms. De Leon noted.
Meanwhile, a bond trader said the result of Monday’s auction continued to be within expectations, although the 182- and 364-day papers remained under pressure.
“Despite potentially lower inflation in the near-term, risks to supply given that the government continues with its thrust for infrastructure and socioeconomic program spending. That is going to continue to threaten supply — meaning higher deficit equals higher supply,” the bond trader said.
During its meeting yesterday, the Development Budget Coordination Committee programmed its fiscal deficit in 2019 at 3.2% of the country’s gross domestic product, wider than the 3% ceiling this year as the government seeks to “eradicate underspending.”
“This may continue to pressure local bond supply,” the bond trader added.
The government is set to borrow P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in Treasury bonds.
Aside from this, plans for another dollar bond float as well as yen-denominated “samurai” papers are also being finalized.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit capped at 3% of the country’s gross domestic product.

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