THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Tuesday after the papers were met by strong demand amid liquidity in the market.

The Bureau of the Treasury raised P15 billion as planned via the T-bills as investors wanted to lend as much as P43.17 billion to the government or nearly three times the volume of the debt papers placed on the auction block.

The government awarded P6 billion worth of 91-day T-bills as programmed as total offers reached P20.867 billion, also more than three times the amount up for auction. These short-termed notes fetched an average rate of 2.143%, down 1.8 basis points (bps) from the 2.161% yield seen during the Aug. 14 auction.

Similarly, the Treasury was also able to raise the planned P5 billion under a 182-day term after total tenders reached P11.610 billion, more than two times the government’s offer. The papers’ average rate rose slightly to 2.592%, up 1.5 bps from the 2.577% fetched during the previous offering.

It also sold P4 billion worth of 364-day debt papers, which attracted some P11.229 billion in bids, nearly thrice the programmed offer. The notes fetched an average rate of 2.935%, down 1.1 bps from the 2.946% seen previously. 

At the secondary market before Tuesday’s auction, the 91-day, 182-day and 364-day T-bills were quoted at 2.1148%, 2.9804% and 2.9210%, respectively.

Yields on the papers dropped as the market closed, with the three-month debt quoted at 2.1109%, the six-month T-bills fetching 2.5798%, and the one-year papers at 2.9073%.

National Treasurer Rosalia V. de Leon said they decided to make a full award of the debt instruments of offer on the back of a liquid market and investor preference for shorter-termed securities.

“[It was] full[y] award[ed], [due to] the liquid market… but other than that, they have a very strong bid,” she told reporters.

The National Treasurer said the strong appetite for instruments at the short end of the curve was driven by external factors, primarily the Jackson Hole Economic Policy Symposium in Wyoming last Friday.

US Federal Reserve chair Janet L. Yellen and European Central Bank president Mario Draghi gave speeches during last Friday’s symposium but did not drop hints on future policy directions, leaving investors with no leads as to when they would tweak rates.

“And also there has not been a lot of news lately so I think that is why the auction is, in terms of the bids, not really [high,]” the National Treasurer added.

Sought for comment, a bond trader said rates sought by banks were within market expectations amid demand for securities on the shorter end of the curve.

“It was pretty much expected. As seen in previous T-bills auctions, investors really like short term papers,” the trader said.

Asked what factors drove rates to move sideways, the trader said: “Uncertainty on future central bank policy decisions in September and next week’s inflation data,” the trader said.

The Philippine Statistics Authority is set to release August inflation data on Tuesday. The prices of widely used goods and services averaged at 3.1% as of July, still within the central bank’s 2-4% target.

The government plans to borrow up to P180 billion locally this quarter — P90 billion each of Treasury bills and Treasury bonds — steady from the previous quarter. It secured P150.602 billion from the sale of government-issued papers during the first quarter, lower than its P180-billion program.

DEBT MARKET REFORM
Meanwhile, in a statement on Tuesday, the Treasury outlined the features of the government’s planned debt market reform, which aims create more fund-raising platforms for the state and produce fresh money supply.

The Bangko Sentral ng Pilipinas, the Department of Finance, the Securities and Exchange Commission, and the Bureau of the Treasury will implement the initiatives announced last Friday, when they were presented at a workshop the Bankers Association of the Philippines, the Money Market Association of the Philippines, and other market participants and stakeholders.

“The proposed reforms are designed to increase efficiency and reduce the cost of dealing in government bonds, provide market incentives to increase levels of participation, introduce new products including hedging tools based on global standards, and reduce current levels of variability and uncertainty in the pricing of government bonds” it said.

Future reforms include a permanent hike in the volume of T-bills and the consolidation of Treasury bonds into six liquid tenors, namely two, three, five, seven, 10, and 20 years. The government is also looking to adopt common semi-annual coupon payment dates for its bonds.

Under the planned reforms, the government is also looking to designate market makers — or firms, like banks or brokerages, that will agree to buy or sell securities or other assets at all times to provide liquidity to markets — with concomitant obligations and privileges.

The reform package also includes the introduction of a GMRA-based repurchase market. GMRA or the Global Master Repurchase Agreement is a model legal agreement designed for parties transacting repos and is published by the International Capital Market Association.

The government will likewise consider putting up a self-regulatory organization for a possible “organized OTC (over-the-counter) market” for securities, the statement said, and implement regulatory reforms to support the adoption of market based and IOSCO-compliant pricing benchmarks. The IOSCO or International Organization of Securities Commissions develops and implements global standards for securities regulation.

“The reforms will be undertaken over an 18-month time frame upon formal launch with specific targets for regulatory and institutional milestones every six months,” the Treasury said. “All reforms will be implemented in a coordinated manner in the respective spheres of responsibility of each of the implementing partner government agencies.” — Janine Marie D. Soliman

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