By Karl Angelo N. Vidal

THE GOVERNMENT made a full award of the P20 billion it planned to raise through the auction of Treasury bills (T-bills) yesterday, with yields ending mixed, as market players parked their funds in the shorter tenor.

Offers received for Monday’s auction totalled P50.1 billion, more than twice the amount the Bureau of the Treasury (BTr) wanted to raise through the auction of three-month, six-month, and one-year debt papers.

The government borrowed P9 billion under the 91-day term as it received bids worth P22.835 billion. With the strong demand, the average interest rate rose to 2.233% from the 2.148% fetched during the previous auction.

The Treasury also made a full award of the P6 billion programmed under the 182-day tenor as banks and financial firms wanted to lend as much as P13.93 billion yesterday. In turn, yields slid to 2.519% from 2.563%.

The 364-day papers followed this trend, with the government awarding P5 billion out of the P13.35 billion in tenders posted by market players. This drove the average yield sideways to 2.849% from the 2.952% fetched in the previous auction.

“Auction results revealed strong demand for the T-bills as average rates trended downward from the previous auction, except for the 91-day tenor,” according to a statement from the Treasury.

National Treasurer Rosalia V. De Leon explained that huge appetite for the shorter tenor drove the yields of the six-month and one-year papers down.

“There’s really a huge appetite for short-tenor maturities. They have to park it in something that is some shorter tenor,” Ms. De Leon said, adding that the yield for the three-month papers rose due to base effects.

Asked about the drivers for the huge demand in the short end, Ms. De Leon said: “There’s a lot of movements like the US Fed[eral Reserve]. Also, there’s some speculations that the BSP (Bangko Sentral ng Pilipinas) will tighten about two to three hikes. At the same time, there’s too much liquidity…”

Meanwhile, traders interviewed said they expected the full award of debt papers after the five auctions wherein the Treasury fully rejected all bids from the market.

“There was demand for the T-bills due to the five auction failures. The market is now ready to buy,” one trader said over the phone.

Prior to yesterday’s auction, BTr rejected five offerings as its cash buffer remained healthy after its successful retail Treasury bond offering last November wherein it raised P255.4 billion.

The Treasury plans to auction off P120 billion worth of Treasury bills and another P120 billion worth of Treasury bonds in the January to March period. This is higher than the P200 billion the BTr offered in the last quarter of 2017.

GLOBAL BONDS
Meanwhile, Ms. De Leon said the Treasury is just waiting for some clearances before offering the $2-billion global bonds, adding that they are “taking a very close look at the market.”

“US Treasuries have gone up by about five to seven basis points already. China would not be buying, but they eventually clarified that they’re rebalancing their portfolio. Japan has reduced its bond buying program. There’s some speculations that they started its tightening,” she explained.

Ms. De Leon added that the Treasury still finalizing the tenor with its underwriters, noting that they are looking at a maturity of around 10 to 25 years.

Asked for its underwriters, she said there would be six, with Citibank, N.A. and Standard Chartered Bank to serve as lead underwriters.

On Thursday, Deputy Treasurer Ma. Sharon P. Almanza told reporters that they are set to offer $2 billion worth of Republic of the Philippines bonds.

“The size of the transaction is $2 billion: $1 billion in new money and $1 billion for liab[ility management],” Ms. Almanza said.

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