THE GOVERNMENT made a partial award of the Treasury bills (T-bill) it planned to raise on Monday, rejecting all bids for the longer tenors, as investors expect faster inflation print in March.
The Bureau of the Treasury’s auction yesterday was met with tenders worth P13.63 billion, which left the total P15-billion offering undersubscribed.
Broken down, the government borrowed just P3.265 billion in 91-day bills, below the programmed P5 billion even as total bids reached P8.725 billion. The paper fetched an average yield of 3.191%, up from the 2.995% quoted at last week’s auction.
However, the Treasury rejected all the bids put up for the 182-day tenor which totalled P2.663 billion, also short of its P4-billion offer.
The government likewise rejected all bids for the 364-day T-bills as the offer attracted only P2.243 billion in demand, below the programmed borrowing of P6 billion.
At the secondary market before the auction, the three-month papers were quoted at 3.3332%, while the six-month tenor fetched 3.4614%. The yield on the one-year T-bill was at 4.1329%.
As trading closed, the 91- and 182-day tenors saw their yields inch down to 3.0554% and 3.169%, respectively, while the rate of the 364-day T-bill finished steady.
National Treasurer Rosalia V. De Leon told reporters shortly after the auction that the government decided to reject bids for the three-month and six-month papers as investors priced in their expectations for the March inflation print scheduled to be released on Thursday.
A BusinessWorld poll of nine economists showed that inflation likely quickened to 4.2% last month. This compares to the 3.9% rate logged in February and the adjusted 3.1% for March 2017.
If realized, this would settle above the 2-4% target range set by the Bangko Sentral ng Pilipinas (BSP), but will fall within the 3.8-4.6% forecast given late last week.
“[With the] median forecast of 4.2%, they’re expecting the next policy rate from the BSP will move,” Ms. De Leon said, adding that investors also priced in the volume to be offered by the central bank under its term deposit facility this week.
Meanwhile, a bond trader said by phone that the Treasury rejected bids for the six-month and one-year papers because of its “very good cash position.”
“[T]hat has been supported by the tax reform law. They essentially have the flexibility to look at the auctions and pick out which is the optimal rate and volume for them,” the trader said.
“On the other end, the reason why investors asked for higher rates is that they’re trying to find the proper price for the additional supply, especially for the short date. And of course, we still have concerns about inflation. — Karl Angelo N. Vidal

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