THE GOVERNMENT made a partial award of the Treasury bills (T-bill) it offered on Monday, rejecting bids for the one-year tenor, as investors await a possible tightening move from the central bank later this week.
The Bureau of the Treasury only awarded P9 billion out of the P15 billion it planned to raise yesterday even as total tenders spiked to P30.34 billion.
Almost half of the total tenders were for the shortest security on offer on Monday. Bids for the 91-day T-bills stood at P15.145 billion, thrice the programmed P5-billion borrowing. The Treasury made a full award of its offer as the rate inched down to 3.439% from 3.486% in the previous auction.
The government also raised P4 billion as planned via the 182-day papers, with total tenders reaching P10.62 billion. The average yield also slipped to 3.958% from last week’s 4.019%.
However, the Treasury rejected all bids for the 364-day security as offers reached just P4.58 billion, below the P6 billion the government wanted to borrow yesterday.
At the secondary market prior to the auction, the three- and six-month T-bills were quoted at 3.675% and 4.4%, respectively, while the one-year papers fetched 4.6%.
At the market’s close, the 91-day securities rallied to fetch 3.3822%, while the 182-day papers saw its yield inch down to 4.3933%. The rate of the 364-day T-bill was steady at 4.6%.
National Treasurer Rosalia V. De Leon told reporters on Monday that investors still prefer to place their funds in the short-tenored papers.
“A lot of the bids flocked to the shortest end of the curve — in the 91- and 182-[day tenors] — first, because the Bangko Sentral ng Pilipinas (BSP) will reduce their term deposit facility (TDF) volume to P60 billion. So it shows the preference for the short end,” Ms. De Leon said.
This week, the BSP will offer just P60 billion under the TDF from P90 billion previously.
Ms. De Leon added that investors factored in their uncertainties about the country’s inflation path.
“Also, the preference [for the short-end] continues to be because of the uncertainties about inflation. Inflationary expectations are also building up, so…hopefully the action of BSP on Thursday will have a calming effect.”
In a BusinessWorld poll, nine out of 11 economists said they expect the BSP to tighten monetary policy at Thursday’s meeting, with inflation hitting multi-year highs and showing slim signs of slowing in the coming months.
Inflation picked up to a five-year high of 4.5% in April. This was higher than the 4.3% print tallied the previous month.
BSP Governor Nestor A. Espenilla said ahead of the April data last week that inflation is becoming broader than initially expected according to latest observations.
“What we react to is whether it’s spreading and it is affecting expectations. And our reading, based on the latest data, it seems to have spread somewhat,” Mr. Espenilla said.
Asked on the rejection of bids for the one-year debt papers, Ms. De Leon said banks are “testing the tolerance level of the Treasury.”
“It’s not something that we will easily accept because they should also see our liquidity position. They should know by now,” she said, adding that the revenue collections of Bureau of Internal Revenue and Bureau of Customs contributed to the government’s comfortable cash position.
A trader shared this sentiment, saying bids by banks for the one-year securities were rejected because they was higher than expected.
“Preference was still in the short securities amid uncertainty of a possible rate hike in the upcoming [Monetary Board] meeting,” the trader added.
The Treasury is holding two auctions per week this quarter — one for Treasury bonds and another for T-bills — to reflect increased borrowing requirements.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — K.A.N. Vidal