THE GOVERNMENT made a partial award of the Treasury bills (T-bills) it offered on Monday, with investors preferring the shorter-dated papers and asking for higher yields for the longer tenors ahead of a possible tightening move from the local central bank next month.
The Bureau of the Treasury (BTr) saw total tenders at yesterday’s auction reach P17.9 billion, slightly above the P15 billion on offer yesterday. However, it only awarded P10.1 billion in the securities due to higher bids by banks.
Bids for the 91-day T-bills stood at P10.914 billion, more than twice the programmed P5 billion that the government borrowed yesterday. Rates inched up to 3.597% from 3.493% in the previous auction.
The BTr meanwhile raised P3.485 billion from the 182-day papers, below the P4 billion it placed on the auction block. The offer was undersubscribed as tenders reached just P4.085 billion, while yields climbed to 3.889% from 3.684% previously.
For the 364-day securities, the Treasury bureau accepted P1.63 billion of the P2.88 billion bids, below the P6 billion it offered, as rates likewise increased to 3.986% from 3.830%.
At the secondary market prior to the auction, the three- and six-month T-bills were quoted at 3.4761% and 3.6111%, respectively, and 4.2625% for the one-year debt papers.
At the market’s close, the 91-day T-bill saw its yield rise to 3.4747%. The rate of the 364-day papers also rose to 4.3054%, while the 182-day securities saw its yield decline to 3.5517%.
National Treasurer Rosalia V. De Leon said investors still prefer the shorter-dated securities, adding that the government still has room to reject higher-yielding bids as it has enough liquidity given strong revenues.
“Again the appetite continues to be on the short part of the curve and continues to be upwards, but at least for this one there is good offering. We have higher subscriptions for both the 182- and 91-day. Obviously, the preference continues to be on the 91-day, the shortest end of the curve,” Ms. De Leon told reporters after the auction.
“I think from the good revenue harvest from the BIR (Bureau of Internal Revenue) and BoC (Bureau of Customs), we see that for the part of the Treasury we are very much still have a strong liquidity position. We are also looking into other funding sources, we are expanding diversifying our markets,” Ms. De Leon said.
She added that the government is currently exploring the possible issuance of yen-denominated Samurai bonds, as well as Islamic sukuk securities this year as other sources of funds.
“We had already the panda, and also the [Finance] Secretary has mentioned we are exploring also the Samurai market and also possibly looking at other structures including the sukuk. So we we’re not confined alone to the onshore but obviously, the bias continues to be for the domestic financing,” Ms. De Leon added.
Traders interviewed yesterday also said that investors aren’t keen to lock in their funds in the longer-dated securities amid a possible rate hike from the Bangko Sentral ng Pilipinas (BSP) at its May 10 meeting.
The market is also cautious ahead of the US Federal Reserve’s own policy meeting on May 1-2, where it is also expected to bump up yields.
“As we expected, there were higher yields on the longer-dated T-bills and weaker demand from the market,” a trader said in a phone interview yesterday.
“I think there’s quite an expectation for possible rate hikes as early as May. Also a factor is the climb of US Treasuries,” the trader added. “The BSP might be forced to increase rates in its next policy meeting. Although another factor would be the liquidity status or current liquidity situation.”
The trader added that the market could have already factored in a possible rate increase in their bids.
“In the secondary market, it won’t be much of a surprise since its already anticipated. Matagal nang inanticipate (They’ve been anticipating a hike for a long time),” the trader said. “So a BSP rate hike might even be a relief.”
A second trader meanwhile said: “US Treasuries hit a four-year high last week, which strengthens the case for a rate hike from the Fed.”
“That’s why the market is expecting the BSP to follow,” the second trader added.
This quarter, the Treasury is holding two auctions per week — one for T-bonds and another for Treasury bills — to reflect increased borrowing requirements, as it is set to raise P325 billion via the domestic market in the period.
It plans to borrow P888.23 billion from local and foreign sources this year to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Elijah Joseph C. Tubayan

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