By Elijah Joseph C. Tubayan, Reporter

THE GOVERNMENT raised P15 billion from its offer of Treasury bills (T-bills) on Monday, as yields sought by banks slid across the board as investors preferred shorter-termed instruments.

The Bureau of the Treasury fully awarded the T-bills, while total tenders were more than four times oversubscribed, reaching P68.3 billion, amid “healthy market demand” on the shorter tenor notes.

Broken down, the government fully awarded the 91-day T-bills after total bids reached P32.58 billion, about five times more than the P6 billion offer. The papers fetched an average rate of 2.032%, down from the 2.088% yield seen at the July 11 auction.

For the 182-day debt papers, it raised P5 billion as planned at an average rate of 2.522%, lower from the 2.564% recorded in the previous auction, after banks sought to buy as much as P20.42 billion.

At the same time, the Treasury fully awarded P4 billion as planned for the 364-day papers, fetching an average yield of 2.861%, also down from the 2.92% posted earlier. The offer attracted as much as P15.31 billion in tenders, three times more than the original program.

Prior to Monday’s auction, the secondary market recorded yields on the 91-day papers at 2.7589%, the 182-day at 2.522%, and 364-day T-bills at 2.8935%.

At the market’s close, the three-month yields increased to 2.9089% while the six-month and one-year rates fell at 2.4951% and 2.8494%, respectively.

The BTr said it decided to award the offer fully, as the rise in prices remain stable.

“There’s demand for this end of the curve, which is the short end. It’s a very good turnout for today’s auction,” Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction’s close.

“Well, basically the domestic inflation picture is quite manageable as a result of the BSP’s (Bangko Sentral ng Pilipinas) pronouncements last week,” he added.

The central bank said domestic inflation will continue to be within the 2-4% target range for 2017-2019, as it kept its benchmark rates unchanged in its policy meeting last week.

The BSP expects inflation to average at 3.2% this year. As of end-August, inflation logged a 3.1% uptick.

Mr. Sta. Ana added the high volume to tenors reflected market players’ risk-off sentiment on rising geopolitical tensions between the United States and North Korea.

“And of course, there are risks externally… Geopolitical tensions as well. Maybe participants are really keen on going on the short end,” he said.

Bond traders meanwhile said the auction’s turnout was within expectations, as market liquidity remains strong, bolstered by the peso’s strengthening in last week’s close.

“Given the strong peso and enough liquidity, we’re seeing strong demand on short-tenored securities, so it’s more than four times oversubscribed,” a trader said in a phone interview yesterday.

Another trader said the BSP’s pronouncement on manageable inflation was not the primary driver during the session, despite its positive outlook.

“Not so much effect. The inflation is still in line with the forecast. I think it is still driven by ample market liquidity,” the trader said.

Moreover, the trader said noted investors are keen on shorter-tenored debt papers amid the US Federal Reserve’s plan to taper off its balance sheet starting next month, and a possible rate hike before the end of this year.

“Most players prefer to invest in shorter securities, given the volatility in the market amidst the possible rate hike in December and the unwinding of portfolio. So preference is still on the shorter notes.”

This quarter, the government plans to borrow P195 billion from the domestic market comprising of P105 billion in T-bills and P90 billion in Treasury bonds, higher than the P180 billion programmed issuance in the previous three month period.