By Melissa Luz T. Lopez, Senior Reporter
THE GOVERNMENT opted for a partial award of the P15 billion worth of Treasury bills (T-bills) it offered yesterday, taking advantage of strong demand that drove yields lower for shorter-termed papers.
Offers received during Monday’s auction amounted to P38.856 billion, surging from the P28.724-billion bids seen a week ago and nearly double the figure which the Bureau of the Treasury planned to raise. This allowed the government to award P12.966 billion worth of T-bills.
All three tenors were oversubscribed, although bulk of the demand still went towards the shorter end.
The Treasury awarded P5 billion worth of 91-day T-bills as market players betted as much as P16.01 billion. This drove the average rate down to 3.437%, some 1.4 basis points (bps) lower from the 3.451% fetched a week ago.
Bids for the 182-day papers also received overwhelming tenders reaching P14.06 billion, which allowed the government to raise P4 billion for its weekly program. Rates saw an even bigger move as it dropped to 3.879%, 5.5 bps lower than the 3.934% average yield during last week’s auction.
Demand for the 364-day tenor also recovered this week to reach P8.786 billion, well above the P6 billion which the state wanted to raise. However, the Treasury rejected some bids due to high margins sought by banks and accepted only P3.966 billion.
Yields averaged 4.297%, slightly higher than the 4.226% fetched a week ago as rates were capped at 4.325%.
Three-month and six-month papers were quoted at 3.4405% and 3.9088% at the secondary market before the Treasury’s T-bills auction, while one-year notes fetched a 4.6536% yield.
At the close of trading, the 91-day and 182-day papers’ rate rose to 3.4565% and 3.911%, respectively, while the 364-day T-bills fetched 4.1441%
National Treasurer Rosalia V. de Leon said yesterday’s auction came out as expected, which she described as a “very healthy” turnout.
“We see that there is also liquidity now following after last week’s partial award also, we see the trading appetite also. There’s now a supply for the one-year (papers),” Ms. De Leon told reporters after the auction.
“I think the preference will continue to be on the shorter-dated tenors given that first, they still see the robust possibility for a Fed rate hike and also watching carefully what would be the next action of the BSP (Bangko Sentral ng Pilipinas) also — that continues to be factored in as well,” Ms. De Leon added.
Sought for comment, a trader said such a trend is likely to be sustained amid expectations of higher interest rates in the local and global markets.
“More traders are going into the short end of the market… Inflation and interest rate expectations are driving the local market yields higher,” the bond trader said in a phone interview.
The trader pointed out that players foresee two to three more rate actions from the United States Federal Reserve this year, with another hike expected by June.
“The BSP is also expected to hike one more time. To be safe, players prefer the T-bills,” the trader added.
Roughly P130 billion worth of government-issued bonds will also mature this week, which is expected to unleash fresh liquidity in the market.
Asked whether this will trigger plans to issue retail Treasury bonds, Ms. De Leon said: “We have to monitor how rates are moving.
“Then of course… we are looking after the pronouncements of the central bank and the reaction of the market on these pronouncements as well,” the National Treasurer added.
The national government borrows from local and foreign sources to fund the increased spending and boost economic activity.
The government plans to borrow a total of P888.23 billion this year to plug its budget deficit that is capped at three percent of the country’s gross domestic product.

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