DEMAND for Treasury bills (T-bills) at today’s auction may exceed the amount on offer on the back of lower yields, with market players looking to park their funds in shorter tenors amid continued uncertainty in the market.

The Bureau of the Treasury (BTr) plans to raise as much as P20 billion from the short-tenored securities today.

Broken down, the government will auction off P9 billion in three-month debt papers, P6 billion in six-month T-bills, and P5 billion worth of one-year papers.

“We think it will be oversubscribed by two to three times because there’s a demand on short-end tenors,” a trader said over the phone on Friday.

In the last T-bill auction, the government made a full award of the P20 billion it planned to raise, as the Treasury received offers worth P50.1 billion, more than twice the amount on offer.

“In the T-bills, I think there’s room for lower yields by about five to 10 basis points. The demand will go to the one-year and lower,” the trader added, noting that yields of the six-month and one-year bills in the previous T-bills auction slid to 2.519% and 2.849%, respectively.

Asked what will drive demand, the trader said the recent rejections the Treasury made may have improved appetite for government securities.

“Since the recent auctions were rejected, there’s a need for some supply,” the trader said.

The trader was referring to the five consecutive auctions where the Treasury rejected all offers from banks on the back of its healthy cash buffer after its successful retail Treasury bond offering last November wherein it raised P255.4 billion.

“And they (the banks) also feel [that] given the very liquid position of the Treasury, we’ll not also be inclined to accept high rates offered by the banks,” National Treasurer Rosalia V. De Leon said previously.

The trader added that the strong performance of the local bourse as well as the weak dollar could also boost demand.

On Friday, the Philippine Stock Exchange index (PSEi) finally broke the 9,000 level after it closed at 9,041.20.

Meanwhile, the greenback weakened last week due to the concerns over the United States government’s protectionist trade policies.

“The dollar is weak and the PSEi is also strong. The numbers are good for the local market,” the trader noted.

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 it offered in the last quarter of 2017.

The government borrows from local and foreign sources to fund its budget deficit, which for this year is capped at 3% of the country’s gross domestic product.

The government targets a P888.23-billion gross borrowing plan this year, 22.05% higher than last year.

Of this amount, P176.27 billion will be from external financing while P711.96 billion will be sourced locally. — K.A.N. Vidal

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