THE GOVERNMENT partially awarded the Treasury bills (T-bills) it offered on Monday, rejecting all bids for the shortest tenor, as the market awaits the policy decision of the local central bank.
The Bureau of the Treasury (BTr) opted to make a partial award of the short-dated securities, raising just P8.356 billion out of the P15 billion it intended to borrow yesterday.
Investors placed P22.36 billion in bids, slightly lower than the P24.08 billion offered a week ago but still above the planned borrowing.
Broken down, the Treasury rejected all bids for the 91-day tenor. Tenders from banks amounted to P6.52 billion, above the P5 billion the government offered yesterday.
Had the government proceeded with a full award, the three-month debt papers could have fetched an average rate of 3.49%, 16.7 basis points higher than the 3.323% logged the previous auction.
Meanwhile, the government awarded P4 billion as planned from the 182-day securities. The offer was oversubscribed as tenders reached P7.106 billion. Still, the average yield climbed 5.2 basis points to 3.766% from the 3.714% quoted at the auction last week.
The 364-day papers were meanwhile also partially awarded as the BTr borrowed just P4.356 billion out of the P6-billion program, even as the offer was oversubscribed, with bids reaching P8.733 billion. The average rate on the papers went up 3.3 basis points to 4.357% from the 4.324% posted last week.
At the secondary market before the auction, the three-month papers were quoted at 3.8783% while the six-month tenor fetched 4.2446%. The yield on the one-year T-bill, on the other hand, was at 4.3191%.
At the close of trading, the 91-day T-bill rallied to fetch a lower yield of 3.29%, while the 364-day papers saw its rate climb to 4.321%. The 182-day T-bill’s rate was steady.
After the auction, Deputy Treasurer Erwin D. Sta. Ana said the government decided to reject all bids for the three-month debt papers as investors asked for yields higher than the secondary market.
“The rates were actually higher than secondary market and it’s also higher than the initial guidance from our [eligible dealers]. We felt like it’s not reflective of current market levels,” Mr. Sta. Ana told reporters yesterday.
He added that the BTr partially awarded the one-year securities since the bureau “didn’t want to have at least a drastic increase in the rates.”
“It’s not just about us controlling it but we’re also looking at the submissions, whether it’s higher than the offer size and the secondary market rates. We felt we have to cut it at [that] level.”
The Deputy Treasurer likewise noted that investors are awaiting for the policy decision of the Bangko Sentral ng Pilipinas (BSP) on Wednesday.
In a BusinessWorld poll, six out of 10 economists expect the BSP’s rate-setting Monetary Board to stay on hold in its June 20 meeting amid signs that inflation may be slowing.
Last month, headline inflation accelerated to a fresh five-year high of 4.6% from the 4.5% logged in April. However, the May inflation print was slower than the 4.9% expected by the market.
“We think the market is actually waiting for the results of the Monetary Board meeting this week. And of course, the hawkish comments of the [US Federal Reserve] last week had some bearing on the bids,” Mr. Sta. Ana added.
The Federal Open Market Committee raised its benchmark rates by a quarter of a percentage last week following a similar move earlier this year and amid improved economic conditions in the US.
In a phone interview, a trader said there was mixed reaction from investors.
“Possibly the BTr found the bids for the 91-day papers too high that is why they made a full rejection,” the trader said.
“On the demand side, we saw steady demand from investors. I guess ganoon na talaga ang demand (that’s how demand really is),” the trader added.
This quarter, the Treasury is holding two auctions per week — one for T-bills and another for Treasury bonds — to reflect increased borrowing requirements, as it is set to raise P325 billion via the domestic market in the period.
The government plans to borrow P888.23 billion from local and foreign sources this year to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal