By Janine Marie D. Soliman,
Reporter

THE GOVERNMENT partially awarded its first offer of Treasury bills (T-bills) for this quarter, raising P12.5 billion out of the planned P15 billion, after bids by investors tracked higher US Treasury yields and amid expectations of a spike in global interest rates.

The papers on offer yesterday were met by P24.5 billion in total demand, still filling the P15 billion worth of T-bills the Bureau of the Treasury auctioned off during its first auction for the third quarter.

All three tenors saw ample demand during Monday’s auction. However, the government decided to reject some bids for the six-month and one-year T-bills as rates went above what the Treasury was willing to pay.

The government decided to fully award P6 billion worth of 91-day T-bills as planned, with total tenders reaching double the programmed amount at P12 billion. The papers fetched an average rate of 2.126%, or 4.2 basis points (bps) higher than the 2.084% yield from the last auction held June 19.

The Treasury, however, only raised P4.131 billion from the planned P5-billion borrowing via 182-day T-bills even as total bids reached P5.631 billion. Yields sought by banks averaged at 2.496%, up 7.5 bps from a 2.421% rate seen last month.

Similarly, it only awarded P2.37 billion out of the programmed P4-billion fundraising under the 364-day tenor, rejecting some of the P4.532 billion in offers by market players. The year-long tenor fetched an average rate of 2.926%, jumping by 5.1 bps from a 2.875% average from two weeks ago.

At noon or before yesterday’s auction, yields on the 91-, 182- and 364-day T-bills settled at 2.8643%, 2.4384% and 3.2732%, respectively.

The rates of the three-month and one-year securities were unchanged at the close of trading at the secondary market yesterday, while the yield on the six-month papers went up to 2.5662%.

“It’s a mixed turnout, to be honest, because we’ve fully awarded on the shortest, which is the 91-day, then partial award for the 182- and 364-[days], although talking about bid-to-cover, we are still good. We accumulated about P24.5 billion versus the P15 billion on offer, so it’s a relatively successful turnout for the Treasury,” Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction.

He said the rise in global interest rates caused the government to partially award the T-bills auctioned off yesterday, with demand also focusing on the three-month securities.

“[This is] the reaction of the market on the central banks’ pronouncements abroad like the ECB (European Central Bank,) BoJ (Bank of Japan,) and the US Fed[eral Reserve] for potential rate hikes,” Mr. Sta. Ana said.

“So I think the market is still digesting this news coming offshore and probably that is also the cause of why we didn’t have that much tenders compared to the last auction,” he added.

Aligned with market expectations, the US central bank in June lifted borrowing costs by a quarter of a percentage point to between 1% and 1.25%.

Meanwhile, Reuters reported top central banks — namely the Fed, ECB, BoJ and also the Bank of England — are now in harmony that interest rates are rising, with market players taking these movements into consideration.

A bond trader said by phone that rates sought by investors rose after US Treasuries also climbed, but with bids for the T-bills still within market expectations.

“Rates were higher because of higher US Treasuries. As we track US Treasuries, local yields also went up,” the trader said.

The trader added that investor demand for this T-bills auction was softer than expected due to a weaker peso versus the dollar.

“Demand for short-end also weakened due to a weaker dollar-peso because dollar-peso has not much demand also, so we saw very weak appetite for this auction,” the trader noted.

Asked what other factors contributed to higher bids by banks, the trader said, “At the local front, not much happening. But in general, any US economic data that will be released this week, that is what investors are looking at.”

“But the main driver for this auction are the higher US Treasuries for the week and also higher local bond yields, so those were reflected in [yesterday]’s auction,” the trader added.

The government plans to borrow as much as P195 billion from domestic sources this quarter — through offerings of P105 billion worth of T-bills and P90 billion in Treasury bonds — more than the P180 billion programmed in the second quarter.

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