THE GOVERNMENT partially awarded the Treasury bills (T-bill) it offered on Monday, with yields declining on the shorter end as investors continue to prefer securities that mature faster.
The Bureau of the Treasury (BTr) rejected some bids for the shorter-dated debt papers, raising just P13.24 billion out of the P15 billion it intended to borrow yesterday.
The rejections were made even as the total offer was oversubscribed, with bids at yesterday’s auction totalling P29.67 billion. This is lower than the P37.91 billion recorded last week.
Broken down, for the 91-day securities, the Treasury fully awarded the P5 billion it offered yesterday, with bids amounting to P12.246 billion. The average rate declined by four basis points to 3.296% from the 3.3% logged in the previous auction.
The BTr also raised P4 billion as planned from the 182-day papers. The offer was oversubscribed as tenders reached P10.576 billion, with the average yield declining by 23 basis points to 3.677% from 3.7% last week.
On the other hand, the government accepted just P4.239 billion in bids for the 364-day debt notes out of the P6.849 billion in tenders it saw yesterday and the P6 billion it was programmed to borrow as its rate rose 48 basis points to 4.246% from the 4.198% fetched at the previous auction.
At the secondary market prior to the auction, the three- and six-month T-bills were quoted at 3.8714% and 4.2386%, respectively, and 4.5468% for the one-year debt papers.
At the market’s close, the 91-, 182- and 364-day Treasury bills saw their yields decline to 3.3185%, 3.6447% and 4.1035%, respectively.
National Treasurer Rosalia V. De Leon said investors still prefer the shorter-dated tenors, bidding higher on longer maturities like the one-year bills.
“Except for the 364-day papers, all the rates went trended downwards again. We see here that the appetite continues to be on the short end — the 91-day and 182-day bills,” Ms. De Leon told reporters after Monday’s auction.
Ms. De Leon said banks and other financial institutions also priced in higher inflation expectations as well as the upbeat economic data in the United States in their offers.
In a BusinessWorld poll of 10 economists, inflation is seen to have landed at a median estimate of 4.9% last month which, if realized, will be the fastest rate in at least five years.
The median falls near the midpoint of the 4.6-5.4% range given last week by the Bangko Sentral ng Pilipinas (BSP), while matching the estimate provided by the Department of Finance for May. However, it is faster than the government’s 2-4% target range for the year.
Despite elevated inflation expectations, Ms. De Leon said this is only transitory.
“We have been communicating that this is really transitory because eventually, inflation will be trending downwards in 2019,” Ms. De Leon said.
Meanwhile, the US economy continue to add more jobs last month, with non-farm payrolls reaching 223,000. The May figure was better than the 188,000 additional jobs expected by the market. The unemployment rate was likewise at a 18-year low of 3.8%.
“All those contributed for investors to be inclined towards the short end,” the official noted.
Meanwhile, a trader noted that there was strong demand for the one-year T-bills.
“We still saw some good demand for the one-year, but I think the BTr had other plans for the average on that,” the trader said in a phone interview.
The trader said the BSP rate hike last month also affected the rates.
“We recently saw the BSP raise its policy rates by 25 basis points. That had an impact on where interest rate on the short date should be,” the trader said, adding that the market is also preparing for the retail Treasury bond (RTB) issuance on June 13.
“I guess they just want to be paid more for the longer tenors.”
RETAIL BONDS
Meanwhile, the National Treasurer said the government has yet to decide if it will cap RTB sales as investors are waiting for the inflation data to be released today.
“We are still [thinking about it] because investors right now are waiting for the results of the inflation and also in terms of the data coming out of the US before they make their own investment decision whether to participate in the RTB or not,” Ms. De Leon said.
She added that the RTB sale was already in the “hundred [million peso] mark” as of yesterday.
The government started selling small-denominated retail bonds on Wednesday. The three-year bonds carry a coupon of 4.875% and will mature on 2021.
In the first day of the debt sale, the Treasury sold P66-billion worth of three-year papers against total tenders of P92.8 billion from banks and other financial firms.

RELATED ARTICLESMORE FROM AUTHOR