THE GOVERNMENT partially awarded the Treasury bills (T-bill) it auctioned off yesterday, rejecting all bids for the shortest tenor amid tepid demand, as investors preferred to lock in their funds in longer maturities due to easing inflation expectations.
The Bureau of the Treasury (BTr) raised just P11 billion out of the P15 billion it intended to borrow. Total bids from market participants reached P29.28 billion — almost double the offer size but lower than the P30.28 billion received last week.
Broken down, the Treasury rejected all bids for the 91-day tenor, with tenders from investors amounting to P3.131 billion, below the P4 billion the government wanted to borrow.
Had the government proceeded with a full award, the three-month debt papers would have fetched an average rate of 5.641%, up 34.6 basis points (bp) from the 5.295% logged the previous auction.
Meanwhile, the government fully awarded the 182-day securities, borrowing P5 billion as planned. The offer was more than thrice oversubscribed as tenders reached P16.203 billion. The average yield climbed just 1.4 bps to 6.294% from the 6.28% quoted at the auction last week.
The Treasury likewise made a full award of the 364-day papers, accepting P6 billion out of the total bids totalling P9.945 billion. The debt notes yielded 6.55%, up 2 bps from the previous offer’s 6.53%.
The three-month, six-month and one-year papers were quoted at 5.434%, 6.194% and 6.574%, respectively, yesterday, based on the PHP Bloomberg Valuation Service Reference Rates.
Following the auction, National Treasurer Rosalia V. De Leon said the market’s preference is currently on the longer end as players see inflation decelerating in the coming months.
“I think the market preference now is…inching towards the longer part of the yield curve given the demand for the six-month and one-year (papers). They like to lock in rates at this point,” Ms. De Leon told reporters yesterday.
She added that market players are already pricing in the “easing of inflationary pressures” as well as the decline in oil prices.
Inflation stood at 6.7% in October, matching the previous month’s print which was a nine-year high. On a monthly basis, inflation eased to 0.3% from 0.9% posted in September.
The Bangko Sentral ng Pilipinas (BSP) has raised its benchmark rates by 175 bps this year following five straight hikes done to rein in inflation expectations.
“Ang laki na ng binagsak ng oil prices (Oil prices have gone down significantly) so there’s already the possibility that inflation is really going down already and the might also trigger a pause in terms of BSP policy action,” Ms. De Leon added.
Meanwhile, a bond trader said the results for the six-month and one-year papers were expected.
“We saw demand on the longer tenors probably because that’s where the client demand to serve the end-user requirements. They have to replenish the longer tenors,” the trader said in a phone interview, adding that the tepid demand for the three-month T-bills was also expected.
The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in T-bonds.
DOLLAR BONDS
Meanwhile, Ms. De Leon said there is “still some window” for the Treasury to offer dollar-denominated Republic of the Philippines (RoP) bonds this year despite the risk-off market sentiment amid geopolitical issues abroad.
“We’ll see — there’s still some window before the end of the year,” the Treasurer said.
She added that the market is on a wait-and-see mode on the developments regarding the meeting of Chinese and US Presidents Xi Jinping and Donald Trump during the G20 Summit, as well as the upcoming policy meeting of the US Federal Reserve, among others.
The Treasury said in September it is still looking at issuing RoP bonds this quarter after it offered 10-year greenback bonds last January amounting to $2 billion which carry a 3% coupon.
Ms. De Leon also noted that the BTr does not have any plans to issue retail Treasury bonds (RTB) given its healthy cash position.
“Walang (There’s no) RTB for this year. We have not really discussed RTB. We have a very strong cash (position) given the…good outcome of our auctions,” she said.
“We also did the tap [facility] and then we also have other inflows coming from the program loans that we also expect which will further deepen our cash (position).” — Karl Angelo N. Vidal

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